Buy 5Paisa Capital After Brokerage Firm Posts Decent Q4Fy22 Results For 28% Gains: ICICI Direct

As anticipated Indian markets had a weak opening in trade on May 2, 2022 on global economic outlook concerns. At around 9:30 am, Nifty traded down at 16955. A host of factors will give direction to markets this week including LIC IPO, US Fed meet among others.

Buy 5Paisa Capital for a target of Rs. 450 per share

ICICI Direct is bullish on the counter of 5Paisa Capital i.e. among the country's leading discount stock broker running with the backing of IIFL group. The company has aggressive client accretion with nearly 84% incremental clients from Tier II and below cities. Furthermore, majority of the company's client base is under 35 years of age. As on March 2022, the company accounts for around 3.5% of the retail market share.

 

Q4FY22 Results: Key highlights as listed by the brokerage

Some of the key highlights as mentioned by the brokerage include

-ADTO was up 23% QoQ amid robust client accretion at 3.59 lakh

- Active clients jumped sharply 27% QoQ to 18 lakh

- Revenue was up 10% QoQ and 78% YoY to Rs. 88 crore, primarily led by 56%
YoY uptick in brokerage revenue.

- There has been no change in opex which has been maintained at 2%.

- PAT was up around 3.5 times QoQ to Rs. 4.7 crore.

Target Price and Valuation: "We value 5 Paisa at approximately 36x FY24E EPS and 3x FY24E revenue on FY24E estimates to arrive at revised target price of Rs. 450 per share", mentions the brokerage report.

Rationale for investment in 5Paisa Capital:

- Focus on aggressive client accretion to aid ADTO and thereby topline

- Opex being maintained constant shall fuel earnings trajectory northwards
- Strong focus on client activation to support ARPU and thereby revenue
- Furthermore gain in market share ahead will help to command a better multiple

Alternate Stock Idea:

"Apart from 5 Paisa, in our coverage we also like MCX.MCX is a leader in commodity derivative exchanges in India with around 94%

market share in commodities future space as on FY21. BUY with a target price of Rs. 2,000 i.e. for an upside of nearly 42% considering the current market price of Rs. 1410.9.

Disclaimer:

The stock idea is taken from the brokerage report of ICICI Direct. The story should not be construed as an investment advice, instead for any market related bets, readers and investors need to engage in thorough analysis.