New-age stocks in focus; Paytm, Policybazaar, Zomato, Nykaa gain up to 10%

Shares of beaten down new-age internet companies rallied  up to 10 per cent on Wednesday, supported by heavy volumes, on expectation of improvement in financial performance.

Shares of digital financial services firm One97 Communications, which owns Paytm; PB Fintech, the parent company of Policybazaar; food aggregator platform Zomato; and Nykaa's parent company - FSN E-Commerce Ventures zoomed in the range of 5 per cent to 10 per cent on the BSE in the intra-day trade today. In comparison, the S&P BSE Sensex was up 0.71 per cent at 60,716.

In the past one year, these stocks have underperformed the market by falling between 31 per cent and 53 per cent, as against 5 per cent rise in the Sensex.

Among individual stocks, Paytm rallied 10 per cent to Rs 647.55 today on the back of nearly four-fold jump in trading volumes. In the past three trading days, it has soared 23 per cent on the back of improved financial performance of the company in the October-December quarter (Q3FY23). A combined 18 million shares had changed hands on the NSE and BSE till the time of writing of this report.

In Q3FY23, Paytm's Ebitda (earnings before interest, taxes, depreciation, and amortization), an indicator of operational profit, before ESOP cost margin, improved to Rs 31 crore. The company said it achieved operating Ebitda profitability three quarters ahead of guidance, driven by revenue growth across businesses, disciplined cost management, and operating leverage.

Paytm narrowed its consolidated net loss to Rs 392 crore in Q3FY23. The company had posted a net loss of Rs 778.4 crore in the same period a year ago. Its revenue from operations jumped about 42 per cent to Rs 2,062.2 crore during the quarter from Rs 1,456.1 crore in the year-ago period. The contribution profit, which excludes taxes and marketing cost, more than doubled to Rs 1,048 crore during the reported quarter on YoY basis.

"Paytm reported adjusted Ebitda breakeven three quarters ahead of management's initial guide of September 2023 target and Street expectations. This was mainly on the back of rising mix of high margin lending revenue, improving merchant subscription, reducing payment processing and promotional charges," analysts at BofA Securities said. The brokerage firm has a 'Neutral' recommendation on Paytm.

Global brokerage Macquarie, meanwhile, has double upgraded the stock to 'outperform' from 'underperform', increasing the target price by a whopping 80 per cent, on Wednesday as it sees a very visible change in the management's approach.

"At the time of listing, profit, and free cash flow were not even a part of management’s discussion. However, we see a very visible change in approach of management to deliver profit, evidenced by the core Ebitda profitability that was reported in Q3," Macquarie said.

Separately, shares of Zomato soared 9 per cent to Rs 53.90, surging 13 per cent in the past two trading days, ahead of Q3 earnings. Trading volumes on the counter more-than-doubled with a combined 177 million equity shares having changed hands on the NSE and BSE.

The board of directors of Zomato is scheduled to meet on Thursday, February 9, 2023, to consider and approve the unaudited financial results for the quarter and nine months ended December 31, 2022. Management, in its recent commentary, indicated that the firm is working to enhance its profitability.

Zomato, with its large strong footprint across 23 countries, is well placed to benefit from the immense potential in the food delivery industry. Its food delivery gross order value (GOV) grew by 23 per cent YoY in Q2FY23 led by healthy 200 per cent YoY growth in Hyperpure business. Management has guided for Ebitda breakeven for ex- Blinkit business by Q2FY24," Motilal Oswal Financial Services said. The brokerage firm recommended a 'buy' rating on Zomato with a target price of Rs 67 per share.