PAYTM share price jumped over 7 percent in early trades after upgrade from Emkay Research Team. PAYTM rarely receives ratings from research houses, mainly due to its highly volatile price action. The stock has been driven mainly by news during the last one year. PAYTM opened at Rs 879 and touched an intraday high at Rs 926. The stock was trading at Rs 905 at the time of publication of this report. Emkay Global Financial Services has raised its price target for Paytm, projecting a 23% potential upside based on improving earnings estimates, stronger revenue momentum, and cost control initiatives. The brokerage sees the recent stock correction as an attractive buying opportunity and cites key regulatory approvals as pivotal to Paytm’s growth. This revised outlook highlights a pathway to profitability by FY26, supported by robust merchant device subscription revenue, increased loan disbursement rates, and a stable cash position.

Higher Earnings Forecast Drives Target Price Revision

20-40% increase in FY26-31E earnings estimates: Emkay has revised its forward earnings expectations, reflecting enhanced revenue growth and effective cost optimization.
Improved revenue trajectory: Stronger merchant device subscription income and expanding cross-sell opportunities in retail financial products like loans, insurance, and wealth management underpin this revision.
Path to profitability: Analysts believe these factors, combined with better take rates on merchant loans, position Paytm for early profitability by FY26, with acceleration thereafter.

Attractive Entry Point Post-Correction

Reasonable valuations: The recent pullback in Paytm’s stock price is seen as an entry opportunity for investors, with Emkay describing the current valuation levels as reasonable.
Margin of safety in cash reserves: Following the PayPay Corp stake sale, Paytm’s Cash/MCap ratio is 21%, significantly higher than peers like Zomato, which stands at 5%. Analysts see this as providing both financial stability and the flexibility to accelerate growth or reward shareholders.

Regulatory Approvals and Future Catalysts

Relief from major regulatory overhang: The NPCI approval has removed a key hurdle for One97 Communications, Paytm’s parent company, allowing the firm to rebuild its Monthly Transacting Users (MTU) base and enhance its revenue streams.
Potential payment aggregator license: A further easing of the regulatory stance, including a payment aggregator license, could serve as a positive catalyst, improving operational stability and market confidence.

Positive Traction in Merchant and Non-Operational Income

Merchant device subscription revenue growth: Continued momentum in this area contributes to higher recurring revenue streams.
Improved loan disbursement rates: Paytm’s merchant loan business is showing accelerating growth with better take rates, boosting profitability.
Rising non-operational income: Treasury income from recent asset sales, including the stake sale in PayPay Corp, adds further financial stability and supports potential shareholder returns through dividends or buybacks.

Analyst’s Perspective

Broader cross-sell opportunities: With a stabilized MTU base, Paytm can focus on cross-selling financial products, such as home loans and insurance, thereby improving revenue per user.
Road to sustainable profitability: Emkay’s forecast suggests Paytm is on track to achieve profitability by FY26. This outlook is backed by a mix of cost discipline, diversified revenue sources, and incremental improvements in operating metrics.