HDFC Securities Institutional Research Desk: Angel One - Rising and shining; maintain BUY

Krishnan ASV, Institutional Research Analyst, HDFC Securities and Sahej Mittal, Institutional Research Analyst, HDFC Securities.

ANGELONE printed 15% growth in topline sequentially on a strong base (15% Q3), resulting in an 11% beat, led by better-than-estimated customer activity (higher average revenue-generating orders per customer) and stronger ancillary transactional revenue. We are comforted by ARGO's indicators of stabilisation, which include higher quality customer adds and improved activation levels. Controlled marketing and operating spends resulted in an all-time high EBITDA margin of 55%; nevertheless, management has guided that a strong focus on marketing and technology will be maintained in FY23E following the launch of Super app, with increased spending. Given the flat-fee model, ANGELONE is one of the best plays on the secular growth story in Indian capital markets and our highest-conviction BUY. We raise our FY22/23E earnings estimates by 13/23% based on management's strong commentary about targeted client additions in FY23E/24E, but trim our target multiple to 19x (from 20.5x) to account for higher costs of capital. We maintain BUY with an increased target price of INR2,050 (19x Sep-23 EPS).

Strong growth across the board: Net broking revenue came in at INR2.65bn (18% QoQ), albeit on a strong base of 19% QoQ in Q3FY22. It was driven by (a) strong derivatives volumes in the industry and improvement in retail derivative market share to 21.2% (+30bps QoQ). Average revenue generating orders (ARGO) per customer, at 21.6 (-3% QoQ), have started to show signs of stabilisation despite this strong growth in customer base, indicating improvement in activation rates. Ancillary transactional revenue, at INR 0.6bn (+53% QoQ), continues to grow unabated on the back of arbitrage driven by high volumes (now 8% of the mix), driving EBITDA margin to an all-time high at 55% and APAT to INR 2.05bn (+24% QoQ, 18% beat).

All eyes on Super app launch: Management stated that Super app will be launched in a phased manner and is currently being tested. It is aimed at improving client journeys to decrease the bounce rate and offer clients investment products on a single platform. However, in the near term, we remain wary of customer pushback in switching to a new app, which may result in customer drop-offs and lower trading activity. The company has also launched direct MFs on the ANGELBEE app to retain customers who previously completed their MF journey with a competitor.

Shares of Angel Broking Limited was last trading in BSE at Rs. 1890.40 as compared to the previous close of Rs. 1918.70. The total number of shares traded during the day was 348984 in over 18911 trades.

The stock hit an intraday high of Rs. 1991.45 and intraday low of 1862.55. The net turnover during the day was Rs. 670995657.00.

Source : Equity Bulls

Keywords

AngelOne INE732I01013 Q4FY22 ResultUpdate HDFCSecurities