Paytm by Macquarie
Paytm by Macquarie
Paytm by Macquarie
com
Price catalyst
Analysts
• 12-month price target: Rs900.00 based on a DCF methodology.
Macquarie Capital Securities (India) Pvt. Ltd.
Suresh Ganapathy, CFA +91 22 6720 4078 • Catalyst: Rising losses and regulations capping payment charges
[email protected]
Maintain underperform
Param Subramanian +91 22 6720 4099
[email protected] • Stock trades at 17x FY23E sales which we believe is expensive. Maintain UP
with revised TP of Rs900.
Please refer to page 6 for important disclosures and analyst certification, or on our website
www.macquarie.com/research/disclosures.
Macquarie Research One 97 Communications (PAYTM IN)
Fig 1 We have seen cuts in commerce and distribution revenues offset by higher payment
revenues
FY21-26E Now Earlier
Fig 2 PayTM: Average ticket size of loans disbursed over the quarters has been coming down
20,000
18,000 17,391
16,000
14,000
12,000
10,000
8,000
6,017
6,000 5,335 4,996
4,396 4,435
4,000
2,000
-
1Q 2Q 3Q 4Q 1Q 2Q
FY21 FY22
Fig 3 Consequently, in absolute terms, value of loans disbursed has been much lower than our
expectations…
14 12.6
12
10
8 6.9 6.3
6 4.7
4
2.1
2 0.4
0
1Q 2Q 3Q 4Q 1Q 2Q
FY21 FY22
Value of loans disbursed (Rs bn)
10 January 2022 2
Macquarie Research One 97 Communications (PAYTM IN)
Fig 4 …And we cut our distribution revenue projections on an average by ~50% over FY22-26E
Current Projections FY2022E FY2023E FY2024E FY2025E FY2026E
10 January 2022 3
Macquarie Research One 97 Communications (PAYTM IN)
Fig 5 We have shown increasing losses due to revenue cuts and rise in employee and software/cloud expenses
INR mn Revised/Current Earlier Changes
FY22E FY23E FY24E FY25E FY26E FY22E FY23E FY24E FY25E FY26E FY22E FY23E FY24E FY25E FY26E
Payment revenues 28,785 31,885 35,140 38,654 40,411 21,589 22,668 22,314 23,430 24,601 33% 41% 57% 65% 64%
Commerce and cloud 8,928 11,304 14,317 17,667 21,834 16,176 20,257 25,689 31,839 40,056 -45% -44% -44% -45% -45%
Distribution revenues 2,985 4,653 7,219 11,247 17,182 7,110 10,099 14,171 19,469 25,941 -58% -54% -49% -42% -34%
Net sales 40,698 47,842 56,676 67,569 79,426 44,875 53,025 62,174 74,738 90,598 -9% -10% -9% -10% -12%
Employee and 19,184 22,061 25,220 28,133 30,823 16,707 18,846 21,287 24,075 27,261 15% 17% 18% 17% 13%
software, cloud
expenses
EBITDA -17,944 -19,616 -21,030 -23,674 -22,388 -15,670 -16,555 -17,161 -18,808 -19,287 15% 18% 23% 26% 16%
EBIT -19,231 -20,865 -22,544 -25,000 -23,471 -16,957 -17,855 -18,772 -20,232 -20,463 13% 17% 20% 24% 15%
PBT -14,837 -10,863 -12,200 -15,747 -15,264 -12,795 -8,701 -10,064 -12,426 -13,138 16% 25% 21% 27% 16%
PAT -14,837 -10,863 -12,200 -11,810 -11,448 -12,795 -8,701 -10,064 -9,319 -9,853 16% 25% 21% 27% 16%
EPS -23.7 -16.8 -18.9 -18.3 -17.7 -20.4) -13.5 -15.6 -14.4) -15.3 16% 25% 21% 27% 16%
Source: Company data, Macquarie Research, January 2022
Note: The PAT changes are positive because we have shown an increase in loss estimates which tantamount to earnings cut
Fig 6 Target price: PayTM PSg (Price to sales growth) based valuation
CAGR sales growth (FY21-26) 23.2%
Dec-23 annualised sales (Rs m) 50,050
Target PSg multiple (x) 0.5x
Valuation based on PSg (Rs m) 579,703
No. of shares (m) 644
Target price (Rs) (rounded off) 900
Target multiple used - Price to Sales 11.5x
Source: Company data, Macquarie Research, January 2022
Since we value on a PSg basis, using our 0.5x PSg target multiple methodology, we now arrive at a target
price to sales multiple of 11.5x vs 13.5x earlier thereby resulting in a lower target price.
1400
1200
200
1000
100
800
600 1200
900
400
200
0
Previous TP Reduction in Multiple from Reduction in sales Current TP
13.5x to 11.5x
10 January 2022 4
Macquarie Research One 97 Communications (PAYTM IN)
One 97 Communications (PAYTM IN, Underperform, Target Price: Rs900.00)
Quarterly Results 3Q/22E 4Q/22E 1Q/23E 2Q/23E Profit & Loss 2022E 2023E 2024E 2025E
Revenue m 10,175 10,175 11,960 11,960 Revenue m 40,698 47,842 56,676 67,569
Gross Profit m 3,732 3,732 4,777 4,777 Gross Profit m 14,930 19,110 25,326 27,888
Cost of Goods Sold m 6,442 6,442 7,183 7,183 Cost of Goods Sold m 25,768 28,732 31,350 39,681
EBITDA m -4,486 -4,486 -4,904 -4,904 EBITDA m -17,944 -19,616 -21,030 -23,674
Depreciation m 322 322 312 312 Depreciation m 1,287 1,250 1,515 1,325
Amortisation of Goodwill m 0 0 0 0 Amortisation of Goodwill m 0 0 0 0
Other Amortisation m 0 0 0 0 Other Amortisation m 0 0 0 0
EBIT m -4,808 -4,808 -5,216 -5,216 EBIT m -19,231 -20,865 -22,544 -25,000
Net Interest Income m 1,099 1,099 2,500 2,500 Net Interest Income m 4,394 10,002 10,344 9,253
Associates m 0 0 0 0 Associates m 0 0 0 0
Exceptionals m 0 0 0 0 Exceptionals m 0 0 0 0
Forex Gains / Losses m 0 0 0 0 Forex Gains / Losses m 0 0 0 0
Other Pre-Tax Income m 0 0 0 0 Other Pre-Tax Income m 0 0 0 0
Pre-Tax Profit m -3,709 -3,709 -2,716 -2,716 Pre-Tax Profit m -14,837 -10,863 -12,200 -15,747
Tax Expense m 0 0 0 0 Tax Expense m 0 0 0 3,937
Net Profit m -3,709 -3,709 -2,716 -2,716 Net Profit m -14,837 -10,863 -12,200 -11,810
Minority Interests m 11 11 8 8 Minority Interests m 43 31 35 34
Reported Earnings m -3,699 -3,699 -2,708 -2,708 Reported Earnings m -14,794 -10,832 -12,165 -11,776
Adjusted Earnings m -3,699 -3,699 -2,708 -2,708 Adjusted Earnings m -14,794 -10,832 -12,165 -11,776
EPS (rep) -5.92 -5.92 -4.21 -4.21 EPS (rep) -23.68 -16.83 -18.90 -18.30
EPS (adj) -5.92 -5.92 -4.21 -4.21 EPS (adj) -23.68 -16.83 -18.90 -18.30
EPS Growth yoy (adj) % nmf nmf 28.9 28.9 EPS Growth (adj) % nmf 28.9 -12.3 3.2
PE (rep) x nmf nmf nmf nmf
PE (adj) x nmf nmf nmf nmf
EBITDA Margin % -44.1 -44.1 -41.0 -41.0 Total DPS 0.00 0.00 0.00 0.00
EBIT Margin % -47.3 -47.3 -43.6 -43.6 Total Div Yield % 0.0 0.0 0.0 0.0
Earnings Split % 25.0 25.0 25.0 25.0 Basic Shares Outstanding m 644 644 644 644
Revenue Growth % nmf nmf 17.6 17.6 Diluted Shares Outstanding m 625 644 644 644
EBIT Growth % nmf nmf -8.5 -8.5
Profit and Loss Ratios 2022E 2023E 2024E 2025E Cashflow Analysis 2022E 2023E 2024E 2025E
Revenue Growth % nmf 17.6 18.5 19.2 EBITDA m -17,944 -19,616 -21,030 -23,674
EBITDA Growth % nmf -9.3 -7.2 -12.6 Tax Paid m 0 0 0 -3,937
EBIT Growth % nmf -8.5 -8.0 -10.9 Chgs in Working Cap m -6,162 -803 -993 -1,225
Gross Profit Margin % 36.7 39.9 44.7 41.3 Net Interest Paid m -4,394 -10,002 -10,344 -9,253
EBITDA Margin % -44.1 -41.0 -37.1 -35.0 Other m 15,789 10,654 11,350 18,567
EBIT Margin % -47.3 -43.6 -39.8 -37.0 Operating Cashflow m -12,711 -19,767 -21,017 -19,521
Net Profit Margin % -36.4 -22.6 -21.5 -17.4 Acquisitions m -87 -87 -87 -87
Payout Ratio % nmf nmf nmf nmf Capex m -2,442 -2,631 -2,834 -3,378
EV/EBITDA x -39.9 -36.5 -34.1 -30.3 Asset Sales m 56 56 56 56
EV/EBIT x -37.3 -34.3 -31.8 -28.7 Other m -737 -39,591 14,939 13,640
Investing Cashflow m -3,209 -42,254 12,074 10,230
Balance Sheet Ratios Dividend (Ordinary) m 0 0 0 0
ROE % -11.1 -8.5 -10.4 -11.3 Equity Raised m 83,000 0 0 0
ROA % -11.5 -12.8 -14.6 -17.3 Debt Movements m 0 0 0 0
ROIC % nmf -48.6 -24.0 -20.8 Other m 240 252 265 278
Net Debt/Equity % -67.8 -23.4 -18.1 -11.1 Financing Cashflow m 83,240 252 265 278
Interest Cover x nmf nmf nmf nmf
Price/Book x 6.0 6.6 7.3 8.2 Net Chg in Cash/Debt m 67,319 -61,769 -8,678 -9,013
Book Value per Share 207.5 190.7 171.8 153.5
Free Cashflow m -15,153 -22,398 -23,851 -22,900
10 January 2022 5
Macquarie Research One 97 Communications (PAYTM IN)
Important disclosures:
Recommendation definitions Volatility index definition* Financial definitions
Macquarie – Asia and USA This is calculated from the volatility of historical All "Adjusted" data items have had the following
Outperform – expected return >10% price movements. adjustments made:
Neutral – expected return from -10% to +10% Added back: goodwill amortisation, provision for
Underperform – expected return <-10% Very high–highest risk – Stock should be catastrophe reserves, IFRS derivatives & hedging,
expected to move up or down 60–100% in a year IFRS impairments & IFRS interest expense
Macquarie – Australia/New Zealand – investors should be aware this stock is highly Excluded: non recurring items, asset revals, property
Outperform – expected return >10% speculative. revals, appraisal value uplift, preference dividends &
Neutral – expected return from 0% to 10% minority interests
Underperform – expected return <0% High – stock should be expected to move up or
down at least 40–60% in a year – investors should EPS = adjusted net profit / efpowa*
Note: expected return is reflective of a Medium Volatility be aware this stock could be speculative. ROA = adjusted ebit / average total assets
stock and should be assumed to adjust proportionately ROA Banks/Insurance = adjusted net profit /average
with volatility risk Medium – stock should be expected to move up total assets
or down at least 30–40% in a year. ROE = adjusted net profit / average shareholders funds
Gross cashflow = adjusted net profit + depreciation
Low–medium – stock should be expected to *equivalent fully paid ordinary weighted average
move up or down at least 25–30% in a year. number of shares
Low – stock should be expected to move up or All Reported numbers for Australian/NZ listed stocks
down at least 15–25% in a year. are modelled under IFRS (International Financial
* Applicable to select stocks in Asia/Australia/NZ Reporting Standards).
Recommendations – 12 months
Note: Quant recommendations may differ from
Fundamental Analyst recommendations
Note: Recommendation timeline – if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period.
Source: FactSet, Macquarie Research, January 2022
Company-specific disclosures:
Important disclosure information regarding the subject companies covered in this report is available publicly at
www.macquarie.com/research/disclosures. Clients receiving this report can additionally access previous recommendations (from the year prior to
publication of this report) issued by this report’s author at https://www.macquarieinsights.com.
10 January 2022 7
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