New Age Tech Stocks: Newly-listed tech startups such as Zomato, Paytm, Nykaa recorded better-than-expected June quarter (Q1FY23) results. Zomato, Paytm, Nykaa posted solid year-on-year (Y-o-Y) revenue growth during the first quarter (Q1) of the ongoing financial year (FY23) owing to a rise in gross order value (GOV), strong monetisation in payments, a surge in gross merchandise value (GMV) and unique new-age deep-tech digital products, respectively.
Nykaa
Omnichannel beauty retailer FSN Ecommerce Ventures, popularly known as Nykaa, registered a 41 per cent Y-o-Y growth in revenue to Rs 1,148.4 crore, primarily catalysed by a bumper stock market listing in November last year, and a gross merchandise value (GMV) growth of 47 per cent YoY to Rs 2,156 crore. Nykaa’s consolidated GMV has been growing at a 3-year CAGR of 61 per cent. The GMV of owned brands comprised 11.2 per cent of the total GMV.
Analysts at Edelweiss said that “Nykaa reported a good performance with sustained growth (Q1FY23 GMV up 47 per cent y-o-y/20 per cent q-o-q) being the highlight in the backdrop of uncertain consumer sentiment and physical retail surge. While flat unique visitor trends have reversed in BPC, they persist in Fashion (last four quarters)—though conversions are driving order growth and AOV/private label share remains robust. Nykaa also announced the acquisition of Little Black Book.”
“Overall, we remain constructive on Nykaa. It is, globally, a one-of-its-kind profitable and management-owned new-age business and offers a multi-decade growth opportunity. Baking in a higher WACC and rollover to Sep-23E yields DCF-based TP of Rs 1,743 (Rs 1,859); ‘BUY’,” they added.
Paytm
Paytm – driven by an increase in device subscriptions and accelerated adoption of high-margin businesses such as lending – clocked the highest Y-o-Y revenue growth at 88.5 per cent as the figure rose to Rs 1,679.6 crore compared with the year-ago period.
Analysts at Yes Securities said that “Traction for bread-and-butter Payments Services business was reasonably broad-based with both the Consumer and Merchant sub-segments contributing Rs 5.19 bn and Rs 5.57 bn, growing 73 per cent and 67 per cent YoY, respectively. Financial Services revenue rose 4x YoY to Rs 2.71 bn for the quarter.”
On improvement in net payments margin, the brokerage said: ” Net Payments Margin improvement was driven by (1) The company being able to negotiate better rates from banks (2) Optimizations for better transaction routing, mainly loading of wallet through UPI (3) Improved margin in online payments business due to account rationalization.”
Brokerage house Yes Securities upgraded Paytm from ‘Reduce’ to ‘Neutral’. Acknowledging improvement in trajectory, the brokerage revised the target price to Rs 850 per share. It is an 8 per cent upside on Friday’s closing price of Rs 784 per share.
Zomato
Zomato’s revenue rose 67 per cent YoY to Rs 1,413.90 led by a 10 per cent sequential growth in GOV to Rs 6,430 crore in the April-June quarter and growth in revenue per order. The momentum in GOV was supported by robust growth in order volumes and mild growth in average order values compared with the previous quarter.
“In our recent note, we highlighted the management focus on path to profitability. 1QFY23 results now suggest that we underestimated the urgency, as adj. Ebitda loss came at a low of Rs 1.5 bn, with break-even at food delivery. Heartening to see this is despite a double-digit QoQ growth in GOV,” said global brokerage Jefferies last week.
Following Zomato’s results, Kotak Institutional Equities has lowered its FY2023-25 loss estimates. The brokerage sees the fair value of the stock at Rs 80 now against Rs 79.
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