Angel One
Burn rate to stay elevated; maintain ADD Angel One beat estimates, driven by strong 31% QoQ growth in net revenues, on the back of increased activity, translating into higher ADTO and stronger ancillary transaction revenues (+28% QoQ). However, admin costs spiked again and are likely to stay elevated on the back of investments in brand visibility, additional tech talent, and new businesses. While Angel One has gone through multiple BlitzScale gears (47k daily client adds during Q4FY24), we believe that the quality of incremental customer additions is turning inferior (lower trading intensity). Even as individual wallets are actively looking for asset allocation alternatives, we believe that Angel One’s ability to prioritise speed over efficiency offers the franchise a potent “first scaler advantage” – however, this needs to be weighed up against RoIC. Angel One’s moats are built on a nearperfected digital-native acquisition engine, superior unit economics (although diminishing on a marginal basis), and other qualitative factors that are difficult to replicate. We value Angel One at 20x Sep-25 AEPS (0.7x PEG over FY23-26E) for its potent acquisition funnel and its relatively secular business model. We maintain ADD with a TP of INR3,580 (earlier INR3,510).
▪ Strong core broking income: Net broking revenues clocked in at INR6.8bn (+33% QoQ), on the back of all-time high F&O volumes, supported by higher ancillary transaction revenues (+28% QoQ). Admin costs spiked ~33% QoQ on the back of continued blitzscale acquisition, IPL sponsorship (INR230mn), and continued investments in new businesses. EBITDA margin inched up to 44.8% (+81bps QoQ) while APAT clocked in at INR3.4bn (+31% QoQ).
▪ Burn rate to stay elevated: Despite sustained momentum in customer adds (+17% QoQ), the average revenue-generating orders (ARGOs) are trending lower, indicating muted activation rates. Our analysis suggests that activation rates on a 12m rolling basis are now in single-digit territory (8%) and have sharply moderated for the past four quarters. Clients with high trading intent need lesser nudges, reflecting in low activation costs – one of the biggest moats for Angel One, which is now being challenged. This is also translating into a gradual rise in net broking revenue contribution from vintage customers, implying lower revenue contribution from first-year clients.
▪ Maintain ADD: Angel One remains one of the best core portfolio plays on the secular growth story in the Indian capital markets. However, we continue to believe that the unit economics is beginning to plateau, especially given early signs of diminishing marginal utility from newly-acquired customers. We maintain ADD with a target price of INR3,580 (20x Sep-25E EPS)
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