This Broking & Allied Service Stock To Give Potential 36% Return, Gave 365% Return In 5 Years

The stock of Angel One Ltd has received buy rating with a target price of Rs 1750 apiece with a potential gain of 36% from leading brokerage Motilal Oswal. Angelone's PAT declined 11% QoQ, albeit, grew 50% YoY to INR1.8b (8.6% beat) in 1QFY23. The beat in profitability was led by a 4% beat in operating revenue, which rose 3% QoQ and 62% YoY to INR4.2b. The 14% beat in net interest income and 4% beat in F&O revenue drove the outperformance.

Angel One Ltd Stock Outlook

The current market price of the stock is Rs 1283 apiece. The 52-week high of the stock is Rs 2022 apiece and 52-week low is Rs 839 apiece. The stock has given multibagger returns of 365% in the last 5 years. According to Motilal Oswal, if you invest in the stock at its current market price, it can give you a potential return of 36%.

Beat on interest revenue; F&O share continues to rise

Angelone's operating revenue was subdued, with a 3% QoQ and 62% YoY growth to INR4.2b (4% ahead of our estimate), driven by healthy interest income. Gross broking business declined marginally on a sequential basis led by a 23% QoQ decrease in cash broking revenue to INR659m. This was partially offset by a 3% QoQ growth in the F&O segment to INR3.8b. The share of the F&O segment in gross broking revenue further increased to 81% in 1QFY23 from 78% in 4QFY22. On a quarterly basis, average revenue per client dipped to INR453 in 1QFY23 from INR513 in 4QFY22.  Other income declined 8% QoQ, but grew 18% YoY to INR0.9b (in line).

Muted Revenue Performance

Total Opex grew 16% QoQ and 53% YoY to INR2.7b (in line). Muted revenue performance and an increase in expenses led to an expansion in C/I ratio to 51.6% from 45.1% YoY in 4QFY22. Employee costs jumped 71% YoY and 36% QoQ to INR1b (8% ahead of our estimate). The sharp jump can be attributed to: 1) hiring of 20 personnel in the digital team in 1QFY23, taking its digital talent pool to 630; 2) ESOP expenses; and 3) annual increment and variable pay. Employee cost, as a percentage of operating revenue, climbed to 20% from 15% in 4QFY22.

Valuation

According to Motilal Oswal, "Angelone is a perfect play on: 1) the financialization of savings and 2) digitization. It demonstrated a decent performance in 1QFY23, even amid challenging market conditions. As guided, the management continues to invest in technology and strengthen its position. Considering the macro environment, most of the discount ensure healthy profitability. The same can be scaled up as and when the environment is relatively conducive. Our FY23 earnings estimate remains unchanged as a cut in volume assumption is offset by higher interest income. However, we reduce our earnings estimates for ANGELONE by 4.8% in FY24 as we moderate our growth assumptions for order volumes. We maintain our BUY rating on the stock with a revised TP of INR1,750 (premised on 18x FY24E EPS)."

About Angel One Ltd

Angel One Limited (formerly known as Angel Broking Limited) is a member of the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), Metropolitan Stock Exchange of India (MSEI), NCDEX & MCX. Angel One Limited is also registered as a Depository Participant with CDSL. It is a technology-led financial services company providing broking and advisory services, margin funding, loans against shares (through one of its Subsidiaries, AFPL) and financial products distribution to our clients under the brand "Angel One". It has a market capitalization of Rs 10,688 crore. 

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal Financial Services. Greynium Information Technologies, the author, and the 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 taking any investment decisions.