Buy This Multibagger Small Cap Financial Services Stock For Gains Up To 20%, Says ICICI Securities

ICICI Securities has given a BUY rating on the Angel One Limited stock with a near-term Target Price of Rs 1,980. The stock is likely to surge 20% from the Current Market Price considering the given target price. Angel One is a small-cap telecom financial service provider stock engaged in broking and allied services. It has a market cap of Rs 13,703.59 crore.

Angel One (Angel) has reported consistent client additions, growth in number of orders and cost discipline, which is reflected in PAT increasing from Rs1.34bn in Q2FY22 to Rs2.14bn in Q2FY23.

Stock Outlook & Returns

On Friday, 14 October, the stock closed at Rs 1,649.60 per share, up 2.75% from its previous close on NSE. Ths stock was listed on the exchange in October 2020. Since its listing, the stock has given 498.11% positive returns to shareholders. 
It has given an 8.03% positive return in the past 5 days, whereas, in the past 1 month, it gave 5.54% positive return. In the past 3 months, the stock has given 25.72% positive returns. However, in the past 1 year, the stock surged only by 0.77%. 
On NSE, the 52-week low of the stock is Rs 990.50, which was recorded on 30 November 2021, and the 52 week high is Rs 2,022, recorded on 29 April 2022, respectively.

Q2FY23 operating highlights

1) Gross client addition declined 7% QoQ to 1.2mn in Q2FY23 from 1.3m in Q1FY23.

2) less than 2-year-old clients contributed 69% of brokerage revenue in Q2FY23 as against 72% in Q1FY23.

3) number of orders grew 11% QoQ

4) median age of clients acquired remained low at 29 years.

5) digital focused talent pool stood at 633 as of Q2FY23 vs 630 in Q1FY23.

6) app installs stood at 28.6mn in Q2FY23 vs 25.4mn in Q1FY23. However, employee count declined to 3,120 in Q2FY23 vs 3,223 in Q1FY23. 

Q2FY23 PAT of Rs2.14bn was above our estimate driven by other income; cost performance remains impressive

Q2FY23 ARPU stood at Rs430, down 5% QoQ (vs 12% decline in Q1FY23). Decline in ARPU was due to an increase in the number of clients (>88% in Q2FY23) who were new to market. Overall revenue (net) grew 8% QoQ driven by 11% QoQ growth in net brokerage revenue and 25% growth in other operating revenue (mostly other income). This was partially offset by 20% decline in net interest income (largely in line with 17.5% dip in average MTF book). Total operating cost remained flat QoQ driven by 3% QoQ dip in other expenses (might be on account of lower client acquisition) and increase of 8% QoQ in employee costs. EBITDA margin improved 400bps QoQ to 52.4% in Q2FY23. 

Maintain BUY for a target price of Rs 1,980

The brokerage said, "We expect order per day to remain resilient in medium term due to client additions although it may dip in near term, in line with market sentiment. We expect FY23 orders at 918mn (437mn in H1FY23) and 10% growth in FY24 over FY23. We expect MTF book to dip in line with correction seen in cash ADTO. Employee cost and other expenses are expected to remain elevated on account of new hirings and investments towards marketing cost in order to expand the market share. Accordingly, we expect FY23E/24E EBITDA margin at 49%/50.7% resulting in PAT of Rs7.5/8.5bn, respectively. Growth optionalities remain in terms of distribution / AMC business under the umbrella brand Ängel One."

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. 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 check with certified experts before making any investment decision.