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Company Update - 5paisa Capital - ICICI Securities

Posted On: 2020-07-21 08:32:04 (Time Zone: Arizona, USA)

5Paisa reported a healthy performance on all fronts. Revenue grew a strong 85% YoY, 20% QoQ to Rs. 42 crore in Q1FY21, largely led by improving ADTO, increasing client base. Robust on-boarding of clients took total customer count to ~7 lakh in Q1FY21 (~5.4 lakh in Q4FY20 and 4.2 lakh customers in Q3FY20). ADTO increased YoY to Rs. 28500 crore though decline in derivatives volume led to marginal decline in overall ADTO QoQ. Healthy growth in margin funding kept traction in interest income steady. Steady opex led operating leverage kicked in leading the company to report profit for the first time at Rs. 3 crore vs. a loss of Rs. 1.8 crore in Q4FY20.

Valuation & Outlook

5Paisa has been growing its customers robustly in the last three years. The lockdown further fuelled customer addition pace and, hence, aided ADTO growth. Rise in revenue may outpace growth of higher customer acquisition cost, which would lead operating leverage to kick in, thus keeping earnings positive. We expect PAT to grow to Rs. 19 crore in FY22E. Accordingly, we expect uptick in return ratios with RoE at ~12.4% in FY22E. Continued addition of new products including launch of P2P lending platform is seen enabling higher revenue in the long run. Given ~80% of customers are new to market and over 81% are from Tier II/III locations, without long experience and steep correction in recent past, burnout ratio or leakage is to be watched. Growth prospects stay strong though recent stock price run up prompts us to maintain HOLD. The stock is currently trading at 50.6 P/E, 4.2x revenue. We value the company at 4.5x FY22E revenue, revising TP to Rs. 385.

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Shares of 5paisa Capital Ltd was last trading in BSE at Rs.385.55 as compared to the previous close of Rs. 367.2. The total number of shares traded during the day was 21023 in over 710 trades.

The stock hit an intraday high of Rs. 385.55 and intraday low of 358.1. The net turnover during the day was Rs. 8068327.

Source: Equity Bulls

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