JM Financial maintains Buy on One97 Communications, lowers target price to Rs 1,010

JM Financial has maintained a buy call on One97 Communications with a revised target price of Rs 1010 (earlier Rs 1250). The current market price of One97 Communications is Rs 787.5. Time period given by analyst is a year when One97 Communication price can reach the defined target. One97 Communications, incorporated in 2000, is a Small Cap company with a market cap of Rs 49970.80 crore, operating in the Services sector.

One97 Communications' key products/revenue segments include Sale of services and Other Operating Revenue for the year ending 31-Mar-2024.



Financials
For the quarter ended 31-12-2024, the company has reported a Consolidated Total Income of Rs 2016.50 crore, up 9.95% from last quarter's Total Income of Rs 1834.00 crore and down -32.76% from last year same quarter Total Income of Rs 2999.10 crore. The company has reported net profit after tax of Rs -208.30 crore in the latest quarter.

The company?s top management includes Mr.Vijay Shekhar Sharma, Mr.Madhur Deora, Mr.Ashit Ranjit Lilani, Mr.Rajeev Krishnamuralilal Agarwal, Mrs.Pallavi Shardul Shroff, Mr.Gopalasamudram Srinivasaraghavan Sundararajan, Mr.Ravi Chandra Adusumalli. Company has Price Waterhouse Chartered Accountants LLP as its auditors. As on 31-12-2024, the company has a total of 64 crore shares outstanding.

Investment Rationale
With UPI incentives being tapered markedly in FY25 (Rs 15 bn) and FY26 (Rs 4.37 bn), JM Financial has lowered itsrevenue estimates for Paytm with the corresponding impact to EBITDA and PAT estimates as well. The brokerage, however, bakes in c.25% probability of MDR on Rs 2,000+ transactions in FY27 and would reiterate that there could be a substantial upgrade to these estimates in case MDR or PPBL approval comes through with each trigger likely to add INR 5 billion + to FY27 EBITDA estimates.

With Paytm working its way up post the disruption last year, JM Financial anticipates three potential regulatory triggers over the coming fiscal year ? 1) MDR on higher ticket / larger merchants? UPI payments, 2) Removal of embargo on Paytm Payments Bank, and 3) Grant of PA (Payment Aggregator) /PG (Payment Gateway) license. While even one of these coming to fruition could create significant upside opportunity, timing is trickier to predict. The company has already received a reprieve with NPCI allowing it to onboard UPI customers. With CMP implying 25x FY27E Adj. EBITDA multiple, JM Financial finds limited downside but upside movement could be sharp and substantial, particularly considering their FY27 EBITDA estimate can rise by c.35% if either of trigger 1 or trigger 2 materialise. Hence, the brokerage reiterates BUY with Mar?26 target price of Rs 1,010 with potential for sharp upside risks. However, we lower target multiple to 60x FY27E PER, lowered from 70x earlier considering the rising volatility in equity markets.