Sahej Mittal, Institutional Research Analyst, HDFC Securities and Krishnan ASV, Institutional Research Analyst, HDFC Securities.
Angel One - All-time high volumes drive strong earnings
ANGELONE printed a strong 8.5% sequential growth in its top line, driven by all-time high retail derivatives ADTVs coupled with healthy ancillary transaction revenues (+19% QoQ). Staff costs are expected to remain elevated on the back of the management's continued focus on scaling up and investing in additional tech talent. We are encouraged by ANGELONE's intent to align marketing dollars with the pace of customer adds (make marketing spend variable), thereby protecting margins; we continue to monitor these expenses in a soft customer add environment. While derivatives volumes have exhibited strong resilience in volatile markets, we continue to closely monitor retail market-share in this segment. Given the flat-fee model, ANGELONE is one of the best plays on the secular growth story in Indian capital markets and remains a high-conviction BUY with a target price of INR2,020 (17x Sep-24E EPS).
Positive surprise on opex: Net broking revenue at INR3.56bn (+11% QoQ) was in line with estimate, largely driven by strong industry tailwinds (all-time high retail derivative ADTVs) coupled with market share gains in retail derivatives ADTV to 21.7% (+90bps QoQ), and robust transactional revenues (+19% QoQ). Staff costs shot up +8% QoQ on a high base (Q1: +35% QoQ) on the back of continued hiring in the digital pool. However, the sequential slowdown in customer adds has translated into moderation in opex (-5% QoQ), indicating the company's tactical strategy to protect margins in a soft customer add environment, driving EBITDA margin higher by 496/400bps YoY/QoQ to 52.4% and APAT to INR 2.13bn (+18%QoQ, -3% vs. estimates).
Growth outlook: The management stated that its Super app received an encouraging feedback from clients and will be launched for the Android towards late Q3. While in the near term, customer adds are expected to mean revert downwards impacting broking revenues, we believe that the company has enough levers to maintain margins by dialing down its marketing spends in a soft customer add environment. Management expects its tech spends to stay elevated in the medium term as the company builds out a resilient and seamless set of customer journeys.
Shares of Angel Broking Limited was last trading in BSE at Rs. 1608.00 as compared to the previous close of Rs. 1625.70. The total number of shares traded during the day was 25951 in over 2077 trades.
The stock hit an intraday high of Rs. 1638.30 and intraday low of 1545.00. The net turnover during the day was Rs. 41476477.00.