PayPay (PAYP) leads Japan's QR-code payment market and the country's cashless push offers a robust structural tailwind for the company, Morgan Stanley said in a Monday research report.

Morgan Stanley said it expects three-year revenue compound annual growth rate of 24.1%, while gross merchandise value growth and take rate improvement are likely to boost the earnings foundation.

The company is expanding beyond payments into banking and securities by developing new financial infrastructure, which could improve lifetime value per user and diversify revenue streams, according to the note.

The brokerage initiated coverage of the stock with an equalweight rating and a price target of $24 per share.

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