Geojit Picked 2 Midcap Services Sector Stocks, Recommends "Buy" For Upto 31% Returns

Leading brokerage firm Geojit has placed a "Buy" on One 97 Communications Ltd (Paytm) and Zomato Ltd. These two stocks are services sector midcap stocks listed in 2021. Geojit has assigned an attractive target price on the stocks, claiming a potential upside of up to 31%. Below are the details:

Paytm- Stock Outlook & Returns

Geojit has placed a "Buy" on Paytm with a target price of Rs 821/share. Given the target price, if you buy the stock at the current market price it could give a return up to 31%. The stock last traded at Rs 626.85/share on NSE.

It has fallen 3.64% in 1 week. Whereas it has gained 19.15% in 1 month and 16.13% in 3 months, respectively. It has fallen 26.25% in 1 year. However, it has fallen 59.84% since its listing on 18 November 2021. Its 52 week low is Rs 438.35/share and 52 week high is 883.30/share, respectively.

Paytm is primarily engaged in financial services providing payment solutions. It is a midcap stock having a market capitalisation of Rs 40,703.53 crore.

Paytm - Investment-worthy results; a BUY opportunity

According to Geojit, Net sales increased 41.6% YoY to Rs. 2,062cr in Q3FY23, driven by an increase in merchant subscription revenue, growth in its loan distribution and commerce businesses, and increase in customer base. EBITDA before ESOP cost reached Rs. 32cr (vs. Rs. -393cr in Q3FY22), due to sustained growth in contribution profit and strong operating leverage, well ahead of its guided timeline of September 2023.

Geojit said, "The company reported exceptional revenue growth and improved margins. Cost optimisation and strategic partnerships improved its bottom line. A robust product portfolio and a growing customer base bode well for the company's growth potential and will continue to improve its long-term financial performance. Hence, we reiterate our BUY rating on the stock with a revised target price of Rs. 821 based on 4x FY25E P/Sales."

Zomato Ltd - Stock Outlook & Returns

The brokerage has assigned a "Buy" on the Zomato with a target price of Rs 60/share, which implies a potential upside of 16% from its current level. The stock last traded at Rs 15.80/share on NSE.

The stock declined 2.29% in 1 week. Whereas it gained 3.29% in 1 month. It declined 23.49% in 3 months and 41.9% in 1 year, respectively. However, its share value has declined 58.89% since its listing on 23 July 2021. Its 52 week low is 40.60/share and 52 week high is Rs 90.10/share, respectively.

Zomato Ltd is a leading food delivery aggregator in India and has presence in more than 23 other countries. It has a market capitalisation of Rs 44,298.04 crore.

Zomato - Long-term growth prospects remain intact

According to Geojit, Consolidated revenue increased 75.2% YoY to Rs. 1,948cr in Q3FY23. India food ordering and delivery business grew 29.4% YoY to Rs. 1,151cr (up 1.3% QoQ). During the quarter, EBITDA recorded a loss of Rs. 366cr. Net losses widened to Rs. 347cr in Q3FY23, from Rs. 63cr as compared to Q3FY22.

Geojit said, "Despite the short-term challenges, the company is expanding its product offerings, optimizing investments, and improving delivery efficiencies. Furthermore, its larger user base and strong restaurant partnerships highlight the company's future potential. Hence, we reiterate our BUY rating on the stock with a revised target price of Rs. 60 based on 4x FY25E P/Sales."

Disclaimer

The stocks have been picked from the brokerage reports of Geojit. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.