The international brokerage interacted with the managements of the two companies, who indicated that they are targeting more than 20% revenue growth and EBITDA margin expansion. “They are expanding network, growing faster in loan origination and expanding into new areas,” Jefferies said, adding that the recent correction in stock prices was driven by new listings and risk aversion.
Jefferies on Paytm
Paytm continues to leverage its stronger presence in merchant platforms for payments as well as loan origination, Jefferies said, adding that it had a limited impact on restrictions on RMG & rent/education payments made by credit card.The fintech company launched AI-based conversation sound box and is experimenting with it at 10,000 outlets. It may continue to keep sound box pricing stable to gain market share, Jeferries said. “On the lending side, the merchant lending platform is growing faster and offers a better take rate. While current retail lending is mostly vanilla personal loans based on distribution, the opportunity is from credit on UPI that can see stronger volumes once NBFCs are permitted to lend and aid a better take rate on payments as well. It continues to build in wealth and travel platforms, but they will start to make contributions from FY28/29,” it said.
Jefferies sees Paytm delivering 22% CAGR in revenues over FY26-28 and EBITDA margin expanding from 8.5% to 16%, although risks to its estimates can be from discontinuance of UPI incentive and upsides can come from MDR on larger merchant UPI payment volumes. “Sensitivity to change in contribution is higher: a 2% reduction in contribution leads to a 9% impact on Adjusted Ebitda and 10% on profit. Valuations reflect healthy growth at 45x FY27e adj. EV/ Ebitda are attractive,” it added.
The international brokerage retained its ‘Buy’ rating on Paytm shares, but reduced its target price to Rs 1,350 apiece (from Rs 1,400 earlier), as it factored in higher COE, risk of share supply from peers and uncertainty from Middle East conflict. The latest target price implies an upside potential of more than 28% from the stock’s previous closing price on NSE.
Paytm shares declined more than 6% on Monday, falling to Rs 989.9 apiece on NSE.
Jefferies on Pine Labs
For Pine Labs, Jefferies said that revenue growth and operating leverage will aid earnings, while improved working capital will aid capital efficiency. According to its recent interactions with the company, Jefferies said the fintech platform will continue to expand its DCP network. “It is seeing growth in EMI on cards volumes, and will grab tactical opportunities in the distribution of gift cards. In the mid-market merchant segment, it is expanding through master franchises, offering integrated platforms for payments, data analytics, controls, and other aspects. It is also moving towards reducing its working capital requirements towards subscription fee settlements, as well as ICB, through early reconciliation and securitization,” it added.
The international brokerage sees these supporting 23% CAGR in revenues over FY26-28 and rise in adjusted EBITDA margin from 20% to 27%. “We lower FY26 profit as we adjust other income, but FY27-28 stay largely unchanged. Sensitivity to change in contribution is higher: a 2% reduction in contribution leads to a 6% impact on Adjusted EBITDA and 9% on profit. Risk can come from slowdown in sale of mobile phones, with the impact potentially mitigated by stronger summer-linked electronic sales, new partnerships and expansion. Valuations at 20x FY27e adj. EV/ Ebitda are attractive,” it said.
Jefferies reduced its target price for the shares of Pine Labs to Rs 260 apiece from Rs 300 apiece. The latest target price implies an upside potential of more than 58% from the stock’s previous closing price of Rs 164.47 apiece on NSE.
Pine Labs shares declined around 2% to trade at Rs 161.3 apiece on Monday.
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