HDFC Securities maintains its buy rating on Angel One, but it lowers its target price due to a slowdown in new Demat additions. The target price was revised from ₹2,050/share to ₹1,865/share, indicating an upside of over 45% from the previous closing price.
Shares of Angel One ended at ₹1,286 on the BSE in Tuesday's trade. At the prevailing price, the stock traded at 15.36 times its trailing 12-month EPS of ₹82.66 per share and 6.73 times its book value.
In the last three months, the stock has dropped almost 23.8 per cent to ₹1,238 from ₹1,624. The stock made a 52-week high on April 29, 2022, but failed to hold on to this momentum and fell 37.15%. At current levels, it is trading lower than the 30-day, 50-day, 100-day, and 200-day moving averages.
According to HDFC Securities, the company's net broking revenue was flat sequentially at ₹322 crore, despite a strong base in Q4 FY22, up 19 per cent QoQ. It was driven by the industry's high derivatives volumes, which were offset in part by a 40bps decline in retail derivative market share to 20.8 per cent and a 15% drop in cash volumes.
A sharp decline in average revenue-generating orders (ARGO) per customer, at 18.4, down 16% QoQ, clocked in below estimates despite slower additions, indicating softer activation rates, it said.
Furthermore, staff costs increased by 37% quarter on quarter due to higher-than-expected salary increases (ex-ESOP +20% QoQ), reducing EBITDA margin by 652bps to 48.4% and APAT to ₹180 crore, down 11% QoQ.
The management stated that its Super app, which is currently being tested on iOS, will be launched for the iOS and Android platforms in Q1FY23. The current activation rate on the iOS app is sub-par at 30%, well below the blended activation rate. While in the near term, customer adds are expected to mean revert downward, impacting broking revenues. “We believe that the company has enough levers to maintain margin by dialling down its marketing spending in a soft customer addition environment. Management opined that the regulator’s intent behind investigating the rising F & O volumes is to prevent irregularities in e-KYC at the time of account opening,” said HDFC securities.
On the fundamental side, the company's ROE has consistently increased in the last 4 years. In the March 2022 quarter, the ROE rose to 39.43 per cent, as against 26.24% in the March 2021 quarter.
The company is about to go ex-dividend in the next 2 days. The dividend payment will be ₹7.65 per share, and in the last 12 months, the company paid a dividend of ₹37/share. At the previous closing price of ₹1287.50, the dividend yield stands at 2.87%.
Meanwhile, FIIs have been bullish on the company for a long time. This is clear given their increased exposure to the stock over the last four quarters. FIIs held a stake of 5.0% in Angel One back in March 2021. The exposure now stands at 9.0%. The majority of the increase happened in the most recent quarter. The promoters hold 44 per cent of the shares in the company. Mutual Funds raised their holdings from 7.84% to 9.08% in the March 2022 quarter. The regular shareholders own 36.72 per cent.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
