Paytm's Profit Surge: JM Financial Revises Target as AI Drives Growth

JM Financial reaffirms a positive outlook for Paytm, citing better-than-expected profit margins, growth in payment services, and successful tech innovations like the AI Soundbox. The brokerage highlights Paytm's diverse growth strategies and anticipates profitability boosts from AI and disciplined cost management.

In a resounding endorsement, brokerage firm JM Financial has reiterated its positive stance on the payment giant Paytm, applauding its consistent ability to exceed profit expectations. According to their report dated November 5, Paytm achieved a revenue of Rs 20.6 billion, witnessing a 7 percent quarter-on-quarter increase while maintaining a robust contribution margin of 59 percent. This figure lies at the upper end of Paytm's management guidance range, demonstrating marked efficiency.

JM Financial highlighted that Paytm's EBITDA nearly doubled to Rs 1.4 billion, driven by better payment processing margins and optimized indirect expenses. The firm's strong operational performance, alongside various growth prospects, led the brokerage to retain its 'Buy' rating, setting a higher target price of Rs 1,470, suggesting a potential upside of nearly 16 percent. Currently, Paytm shares stand at Rs 1,269, with its core payments segment gaining momentum; payment services revenue rose 10 percent quarter-on-quarter to Rs 12.2 billion.

Technological advancements remain a focal point, with Paytm launching an industry-first AI Soundbox, morphing the conventional payment alert device into an intelligent business assistant. This move signifies Paytm's technological leadership. Additionally, financial services revenue climbed 8.9 percent sequentially, bolstered by robust merchant loans and equity broking. More than half of the loans were issued to repeat borrowers, underlining strong merchant retention. With significant strides in AI, Paytm has reported measurable productivity gains, reinforcing its market position amidst expanding its international framework through new models and partnerships.

(With inputs from agencies.)