The new-generation companies such as Paytm, Nykaa, Zomato and the other two have either reported year-on-year (YoY) growth or narrowed their losses in the July-September quarter of the financial year 2022-23 (Q2FY23). Most of these companies stocks are trading below their issue/listing price.

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Except Paytm and Nykaa - Zomato, PB Fintech, and Delhivery have narrowed their losses on both YoY and quarter-on-quarter basis. Paytm’s loss widened in Q2, while the management is confident to break even in EBITDA terms in Q2FY24, while Nykaa reported multifold YoY growth in Q2FY23.

Each of them is unique, in terms of business and waiting to turn profitable, except Nykaa- which is already reporting a profit. Among all, Paytm and Delhivery shares may witness pressure as investors' lock-in period ends this week. The same has already been witnessed by Nykaa and PB Fintech in the last week – the latter saw maximum pressure in share price.

Despite reporting losses, the brokerages are bullish on the majority of these counters mainly due to their unique business model. They believe, these companies have the potential to not only break even but turn profitable on a long-term basis.

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Below is the comparison of these new-gen companies on the basis of Q2 Performance, Brokerage View and Share Price History

Paytm

Q2 Performance

One97 Communications-backed Paytm, on November 7, 2022, reported a widening of consolidated loss to Rs 593.9 crore in the July-September quarter of the financial year 2022-23 (Q2FY23) against a loss of Rs 481 crore in the same period a year ago.

While the company’s consolidated revenue from operations increased by around 76 per cent to Rs 1,914 crore during the second quarter of FY23 from Rs 1,086.4 crore in a year-ago quarter.

Brokerage View

ICICI Securities in its report said Paytm continues to improve its revenue and margin profile. The performance was characterised by sustained lower processing charges and net payment margin improving a tad as well as sharp acceleration in lending business with disbursements, it said.

Steady improvement in margin profile with better monetisation suggests an achievement of operating profitability ahead of its guided timeline of Q2FY24, the brokerage said, maintaining a Buy with an unchanged target price of Rs 1,285 based on customer lifetime value methodology.

Share Price History

Shares of Paytm on Monday closed flat with a positive bias to Rs 635, the stock is down nearly 60 per cent in the last one year, while it has gained over 7 per cent in the last six months on the BSE. The stock is likely to correct more as the anchor investors' lock-in period of Paytm ends on November 15.

Nykaa

Q2 Performance

FSN E-Commerce Ventures, which operates under the Nykaa brand, on November 01, 2022, posted a multi-fold increase in consolidated net profit at Rs 5.19 crore in Q2FY23 as compared to Rs 1.17 crore in the same period a year ago.

The fashion and beauty e-commerce company’s consolidated revenue from operations grew by 39 per cent to Rs 1,230.8 crore in the second quarter of the current financial year as against Rs 885.26 crore in the same quarter a year ago.

Brokerage View

According to HDFC Securities, Nykaa has the potential to be a hybrid, it shares more characteristics with a busy, efficient, linear online pipeline than a platform. Additionally, Nykaa’s TAM (Total Addressable Market) seems to be oversold. Hence, valuation stencils must be realigned accordingly.

The brokerage initiates coverage with a Sell recommendation with a target price of Rs 800 per share, implying 81x Sep-24 EV/EBITDA/5x Sept-24 EV/sales. The recommendation by the brokerage is before the ex-date of the bonus issue/stock split of the counter.

Share Price History

Share of Nykaa on Monday up 1 per cent to Rs 211.4 a share on the BSE. The stock has been trading ex-bonus shares/split since Friday. It fell over 44 and 39 per cent in the last one year and six months, respectively. The counter didn’t see much pressure as investors' lock-in period ended last week.  

Zomato

Q2 Performance

Online food aggregator Zomato on November 10. 2022 reported a narrowing of its consolidated net loss to Rs 250.8 crore for the second quarter of FY23 as against the consolidated net loss stood at Rs 434.9 crore in the year-ago period.

While the company’s revenue from operations surged by over 62 per cent to Rs 1,661.3 crore during the July-September quarter, as against Rs 1,024.2 crore in the same quarter of the previous fiscal.

Brokerage View

Zomato’s attempt to accelerate growth, while simultaneously improving profitability in the core business, is a positive, Kotak Institutional Equities said, adding that it believes, it is maintaining decent growth and market share, even when competition continues to discount more aggressively.

The brokerage broadly maintains revenue estimates but assumes a higher near-term contribution margin (CM) and the long-term CM assumption of 5.2 per cent is significantly below the company’s aspiration of around 8 per cent. Kotak retains a Buy stance with a revised target of Rs 100 apiece.

Shares of Zomato on Monday slipped nearly 4.5 per cent to Rs 69.6 per share on the BSE. The stock has slumped over 55 per cent in the last one year, however, gained over 23 per cent in the last six months. The stock on Friday witnessed a massive rally, reacting to better-than-expected Q2 results.

PB Fintech

Q2 Performance

PB Fintech, the operator of Policybazzar, on November 7, 2022, reported a narrowing of consolidated losses at Rs 186.64 crore for the September quarter compared with Rs 204.33 crore in June and Rs 204.44 crore in the year-ago quarter.

Meanwhile, the revenue of the company during Q2FY23 more than doubled (105 per cent year-on-year) to Rs 573.47 crore from Rs 279.58 crore in the same quarter a year ago.

Brokerage View

ICICI Securities said that the roadmap presented by PB Fintech’s management is positive with the aim to reach Rs 800-1000 crore in adjusted EBITDA by FY27. The management also remains focused on its target of Rs 1000 crore PAT by FY27.

The brokerage maintains a Buy stance with a target price of Rs 550, factoring in the threat of possible competition from the proposed insurance marketplace. Hence, HDFC Securities’ FY27E EBITDA remains unchanged, and the implied valuation multiple on FY27E is reduced to 30x at present.

Share Price History

Shares of PB Fintech on Monday fell by 2.5 per cent to Rs 389 per share on the BSE. The stock was down 67 per cent in the last one year, while it slipped 42 per cent in the last one year. The stock corrected more, lately as anchor investors are dumping shares of the firm amid the end of the lock-in period.

Delhivery

Q2 Performance

Delhivery loss in the second quarter of the fiscal year 2022-23 (Q2FY23) narrowed to Rs 254 crore against the loss of Rs 635 crore clocked in the year-ago period. While revenue jumped by 22 per cent to Rs 1,796 crore as compared to Rs 1,497.7 crore reported in the same quarter a year ago.

Sequentially, the logistics company’s loss has also gone down, as it stood at Rs 399 crore in the June 2022 quarter. Similarly, went up marginally it stood at Rs 1,745.7 crore in Q1FY23.

Brokerage View

Kotak Institutional upgrade Delhivery to Add from Reduce, with a target of Rs 415. The brokerage finds the company is well-placed operationally and strategically to weather near-term weakness in industry growth, and eventually drive the increasing relevance of 3rd-party logistics in e-commerce.

The brokerage believes, the company’s weak business commentary reflects more of a moderation in industry growth, led more by cyclical factors than structural impediments or market share loss.

Share Price History

Shares of Delhivery closed over 2 per cent higher on Monday to Rs 370.5 per share on the BSE. The stock has tumbled over 30 per cent since its listing earlier in May this year. While the scrip corrected over 32 per cent in the last one month.

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