Buy ANGEL One; target of Rs 2100: Motilal Oswal

Motilal Oswal's research report on ANGEL One

PAT surged 7% QoQ/39% YoY to INR2.3b (17% beat) in 3QFY23. The profitability was driven by a 6.2% beat in operating revenue, which rose 1% QoQ and 32% YoY to INR4.6b. The key contributor to the outperformance was a 26% beat in net interest income. Volatility in the equity market led to a decline in the active client ratio to 33.6% in 3QFY23 from 36.2% in 2QFY23. Opex grew 21% YoY but were flat QoQ at INR2.65b (3% lower than our expectation), driven by a 43% YoY jump in employee costs. Other expenses grew 11% YoY to INR1.5b, but 5% lower than our estimate. CIR declined to 46% (better than our estimate of 50.5%) from 47.6% in 2QFY23. CIR improved 321bp YoY. The number of orders declined to 226m in 3QFY23 from 230m in 2QFY23. The board has recommended a dividend of INR9.6 per share. For 9MFY23, total income/PAT was at INR16.5b/INR6.2b representing a growth of 41%/48%.

Outlook

We have upgraded our FY23 EPS estimates by 7.6% to factor in higher-than-estimated interest income. For FY24/FY25, we have slightly adjusted our EPS estimates and raised our revenue per order forecasts for the cash and F&O segments while bringing down growth estimates for the number of orders for both the segments given weak trends. We maintain our BUY rating on the stock with a revised TP of INR2,100 (premised on 18x Sep'24E EPS).