Buy ANGEL One; target of Rs 1900: Motilal Oswal

Motilal Oswal's research report on ANGEL One

PAT grew 23% QoQ and 125% YoY to INR1.65b (9% beat) in 3QFY22. The beat on profitability was driven by a) a 2% beat on operating revenue (up 17% QoQ and 105% YoY to INR3.5b) owing to a 5% beat on interest income, whereas net brokerage revenue was in line with our expectation; b) a 4% beat on other income (growth of 5% QoQ and 85% YoY); and c) admin costs coming in 6% below our expectation (growth of 5% QoQ and 103% YoY). CIR stood at 49.3% (est. 52.5%). The management has guided for a stable cost-to-income ratio of 49% in the coming quarters. The lead conversion ratio for direct clients improved substantially during the quarter, which translated into the activation ratio improving to 39% (from 38% in 2QFY22). The new onboarding journey improved the conversion ratio to 40.5% v/s 30.7%. We upgrade our earnings estimates by 8%/7%/7% for FY22E/FY23E/FY24E on the back of a strong margin performance in 3QFY22.

Outlook

We upgrade our PAT estimates by 8.0%/7.3%/6.9% for FY22E/FY23E/FY24E on the back of a better-than-expected CI ratio and the management guidance of the same sustaining. We maintain our BUY rating with revised Target Price of INR1,900 (20x Sep’23E EPS).