Stock Of The Day: Affle Gets 20% Upside Projection As Citi Initiates 'Buy'—Key Levels, Analysts' Take

Affle (India) Ltd. got a 'buy' rating from Citi, as the brokerage initiated coverage on the stock with a target price of Rs 1,600 per share, implying an upside of 19.5% from the previous close.

The ad-tech company is poised to benefit from recovery in mobile-ad segment across digital and omni channel businesses in India and other emerging markets, according to the brokerage. It is an integrated platform for mobile marketing, which leverages its database of more than 3 billion connected devices and deep learnings algorithms, to deliver online conversions to advertisers, it said.

Key Levels

Resistance level: Rs 1,464.95 per share (Tuesday's intra-day high).

Support level: Rs 1,312 apiece (three-day low).

Affle India Ltd. rose 7.06% to Rs 1,464.95, the highest level since its listing on Aug 8, 2019. It pared gains to trade 32.88% higher at Rs 1,407.75 as of 11:09 a.m., as compared to 0.24% advance in the NSE Nifty 50 index. 

It has 36.40% in 12 months, and 8% on year-to-date basis. 

Total traded volume so far in the day stood at 6.8 times its 30-day average. The relative strength index was at 68.49.

Citi On Affle

The brokerage expects 20% top-line CAGR over FY24-27, with operating margin expansion of 400 basis points during the same period.

The target price of Rs 1,600 is based on 48 times FY26 PE multiple, which is at 50% premium to global ad-tech peers. Exposure to growth markets and higher than average expected growth justifies the premium, according to the brokerage.

The company is focused on merger and acquisitions with the most recent acquisition being YouAppi. Synergies from this acquisition could flow in from FY25, according to Citi.

Key competitive advantages include verticalisation, conversion-based business model, data advantage in India and strategic partnerships with supply side original equipment manufacturers across premium touchpoints, it said.

Analysts' Recommendations

Out of 12 analysts tracking the company, nine maintain a 'buy' rating, two recommend a 'hold,' and one suggest 'sell', according to Bloomberg data. The average 12-month consensus price target implies a downside of 0.3%.

Business

Affle's business model is performance driven and monetised via cost per converted user model. Revenue is recognised when a user installs an app, adds products or even interacts with the advertiser after seeing an advertisement. Affle has two segments—enterprise and consumer. The latter is its core business, which delivers converted users to advertisers.

Advertisers contact Affle with a share of their marketing budget to drive customer acquisitions/re-targeting advertisements and Affle leverages its data and recommendation algorithms to run those ads across digital ad-inventory acquired from publishers.