Buy Angel One For Potential Upside Of 50%: Motilal Oswal

In its capital market update released Monday (March 7, 2022), brokerage firm Motilal Oswal is bullish on Angel One for a price target of Rs. 1900. This is an upside of 50 percent from the current price level of Rs. 1266.

Business update for February 2022

The company released its business update highlighting the key business numbers for February 2022. The key takeaways as listed by the brokerage are as following:

Gross client acquisition dipped to 0.45m in Feb'22 from 0.54m in Jan'22. The decline can be attributed to lower number of calendar days (28 v/s 31 days).

Total client base stood at 8.76m as of Feb'22 (+5% MoM and +134% YoY).

Average funding book continued to grow to ~INR16.4b (+3.5% MoM).

The number of orders increased 5% MoM to 70.3m in Feb '22. In addition, the number of orders per day jumped to 3.52m in Feb '22 from 3.35m in Jan '22. Overall ADTO reported strong 9% MoM growth propelled by healthy growth across segments except Equity Cash, which saw a decline of 14.3% MoM.

Angel gained market share in the Commodity segment (+103bp) but lost 32bp and 82bp MoM in the Equity F&O and Cash segments, respectively.

Valuation and view

"Angel is a perfect play on: 1) financialization of savings and 2) digitization. Despite market correction and increased volatility, Angel One hasreported a sequential increase in ADTO as well as in the number of trades,reflecting strength in its business model. We estimate the company to record18% revenue CAGR over FY22-24. The EBITDA margin is likely to remain steady at~50% as Angel has guided for sustained investments in technology and marketing with a focus on acquiring more customers and improve its activation rates. We estimate a PAT CAGR of 20% during FY22-24 and an RoE of 37.6% in FY24. Thestock trades at 12.7x FY24E P/E, which is attractive considering Angel's strongearnings growth profile. We maintain our BUY rating on the stock with a one-year target price of INR1,900 (premised on 20x Sep 2023E EPS)", mentions the brokerage house.

Disclaimer

The stock is taken from the report of Motilal Oswal and the market is highly volatile and has come down sharply from its record highs, so take call accordingly.