Paytm, Zomato, Nykaa, Delhivery, PB Fintech: Which new-age tech firm’s stock to buy post Q3 results?
The listed new-age technology companies have reported a mixed set of results for the quarter ended December 2022. Where FSN E-Commerce Ventures (Nykaa) reported over 70 per cent fall in net profit in Q3FY23, other players, including One97 Communications (Paytm), Delhivery, PB Fintech (Policybazaar) and Zomato continued to report losses during the quarter under review. However, market watchers are bullish on some of these companies.
Paytm’s parent One 97 Communications reported a positive EBITDA before ESOP cost of Rs 31 crore, three quarters ahead of its guidance. However, the company’s net loss narrowed down to Rs 392 crore in Q3FY23 over a loss of Rs 778.5 crore in the year-ago period. Revenue from operations increased 42 per cent YoY to Rs 2,062 crore.
Brokerage JM Financial holds a ‘Buy’ call on Paytm with a target price of Rs 750, indicating an upside of around 17 per cent from the February 14 close of Rs 642.55.
“Paytm has achieved adjusted EBITDA break-even before its stated target of Q2FY24 driven by strong revenue growth across segments, moderation in payments processing and promotion incentives and controlled indirect expenses. While we have remained cautious about Paytm’s business model since our initiation given the high cash burn, risk on-take rates in the financial services business and the long road to profitability, its operating metrics are gradually improving with management’s focus on increasing efficiencies and profitability, which in turn should aid Paytm to turn profitable by FY26E,” JM Financial said.
The net loss of PB Fintech also narrowed down to Rs 87.40 crore in Q3FY23 from a net loss of Rs 297.99 crore in Q3FY22. However, net sales of the company increased 66.1 per cent YoY to Rs 610.09 crore for the quarter ended December 31, 2022. Management expects revenues and margins to rise further as agent productivity rises and benefits of the appointments channel are realised. They also hinted at a sharp profitability uptick in Q4.
However, Nuvama Institutional Equities downgraded the stock to ‘Hold’ with a target price of Rs 550. “Given its market share of 90 per cent-plus in online insurance sales and a growing offline presence, PB is poised to post strong sales. We are cutting FY23 and FY24 EBITDA loss by 8.1 per cent and 12.2 per cent, yielding a DCF-based target price of Rs 550. Given limited upside, we are downgrading PB to ‘Hold’,” Nuvama said.
On the other hand, the net loss of food-delivery firm Zomato widened to Rs 346.60 crore in Q3FY23 against Rs 67.10 crore in the same quarter last year. On the other hand, the net sales of the company grew 75 per cent YoY to Rs 1948.20 crore.
Nuvama Institutional Equities believes that Zomato Gold’s re-launch will be a big boost to growth and said it remains confident of the company’s ability to generate cash. The brokerage has a ‘Buy’ rating on Zomato with a target price of Rs 74.
Meanwhile, Zomato management noted that the short-term negative impact due to the free delivery benefits of gold membership would be offset by improvements in other revenue and fixed and variable cost drivers. In the long term, it believes the program will turn profitable.
“It also noted that the program launch was several months in the making, so the investments towards the program were already baked in their projections and therefore they are confident of achieving the adjusted EBITDA breakeven target for the core business (ex-Blinkit) by Q2FY24. In fact, according to them adjusted EBITDA break-even (ex-Blinkit) is possible in Q4FY23 itself if the company executes well and negates the impact of Gold launch,” JM Financial said in a report.
On the other hand, the net loss of Delhivery came at Rs 194.29 crore in Q3FY23 against a loss of Rs 126.52 crore in the corresponding quarter last year. FSN E-Commerce Ventures (Nykaa) reported a 70.67 per cent YoY drop in profit at Rs 8.19 crore for the December quarter compared with Rs 27.93 crore in the same quarter last year. Revenue from operations rose 33 per cent to Rs 1,462.82 crore compared with Rs 1,098.36 crore in the year-ago quarter. Nykaa said GMV grew 37 per cent YoY to Rs 2,796.50 crore. Gross Profit, it said, rose 25 per cent YoY to Rs 634.70 crore while Ebitda was up 13 per cent YoY at Rs 78.20 crore. Ebitda margins for the quarter came in at 5.3 per cent, Nykaa said.
While retaining a ‘Buy’ call on Delhivery, brokerage ICICI Securities said that the company has been gaining market share and, on the conservative side, expects overall ecommerce shipments to grow 15-20 per cent and partial truckload market to grow 10-12 per cent in a year. Of late, ICICI Securities revised the target price for Delhivery downward to Rs 425 from Rs 460 earlier.
In the case of Nykaa, Elara Capital believes that shares of the company may touch Rs 238. The scrip traded at Rs 142.95 on February 14. “We cut revenue estimates by 1.9 per cent and 11.1 per cent for FY24 and FY25, factoring in lower growth in the fashion segment going ahead to attain breakeven or profitability. However, our BPC revenue estimates are intact. In terms of EBITDA margin, expect EBITDA losses to sustain in the fashion and others segment in the medium term as achieving profitability may be a challenge with high competitive intensity and heavy discounting. But losses will reduce significantly from FY23 to FY25 in both these segments driven by better scale and some efficiency,” Elara Capital said.
Sharing his views on new age stocks, V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said: “New age digital stocks are not doing great primarily because the market is not doing great. India is underperforming this year while markets like China, Hong Kong and South Korea are doing very well. When India’s underperformance changes, new-age digital companies also will start performing. Some results from this segment are very good like Paytm. Zomato also has done reasonably well, but Nykaa’s results came below expectations.”
“The long-term growth potential of these companies is huge and, therefore, in spite of the short-term challenges, these stocks have buyers, particularly after the sharp correction from their listing peak prices,” he said.
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