Angel One - Readiness To Seize Future Growth Opportunities, Says Motilal Oswal

Motilal Oswal Report

Angel One Ltd., in its FY23 annual report, has re-iterated its vision to empower millions of individuals to participate in investing digitally and benefit from India’s growth story. This vision is reflected in Angel One’s Super App Strategy, which aims to go beyond traditional broking services and develop innovative solutions, which will be instrumental in unlocking future growth opportunities.

The robustness of Angel One’s fintech model demonstrates a healthy lifetime value:customer acquisition cost of 7.8 times based on the first three years of aggregate client revenue. As clients increase their engagement on the platform, the LTV:CoA will have a long runway of growth.

Various technological initiatives have helped Angel One reduce its computation and load time by seven times.

The Super App continues to be the face of the company, emphasising client engagement and generating long-term value for its customers. The Super App has established a strong groundwork for incorporating additional client journeys.

Currently, brokerage and allied activities contribute ~95% of the company’s revenues. Over the long term, diversification will accrue as Angel enhances its distribution income. The company’s profit before tax margin expanded to 52% in FY23 from 25.5% in FY20, primarily driven by scale benefits and effective cost-control measures.

Core to Angel One’s growth strategy has been its customer acquisition initiatives, wherein, it has targeted the Millennial and Gen Z population in tier-II and tier-III towns. As a result, the share of tier-II and tier-III towns in its gross customer additions has surged to 94% in FY23.

Valuation:

Angel One is a perfect play on:

1. the financialisation of savings and

2. digitisation.

It demonstrated a strong operating performance in FY23 even during challenging market conditions. We expect it to maintain a cost-to-income ratio around the 50% mark in the medium term, as its incremental cash flows will be invested in employee additions, technology enhancements, and customer acquisitions.

We reiterate our 'Buy' rating on the stock with a revised target price of Rs 2,000 (premised on 14 times March-25E earnings per share).

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