Buy 5paisa Capital Ltd For Target Rs. 600 - ICICI Direct
Capital raising to aid business growth ahead…
About the stock: 5 Paisa is a leading discount stock broker backed by the Nirmal Jain led IIFL group.
* Aggressive client accretion with ~84% of incremental client from Tier II & below cities and ~78% of customers below 35 years of age
* The company has cash market share of 4.43% as of June 2021
Q1FY22 Results: 5 Paisa reported healthy Q1FY22 results.
* ADTO was up 9% QoQ amid robust client accretion at 2.78 lakh
* Revenue was up 21% QoQ to | 60 crore, led by rise in ADTO and MTF book
* Consequent PAT was at | 7.2 crore (up 23% QoQ)
What should investors do?
5 Paisa share price has grown by ~2.3x over the past four years (from ~| 220 in November 2017 to ~| 525 levels in July 2021).
* Being a new age fintech broker, we retain our BUY rating on the stock.
Target Price and Valuation: We value 5 Paisa at ~29x P/E on FY23E EPS to arrive at revised TP of |600 per share.
Key triggers for future price performance:
* Focus on aggressive client accretion to aid ADTO and thereby topline
* Revamp existing product suite and new product launch
* Improvement in technology & branding to support incremental accretion
* Operating leverage with revenue growth outpacing cost of acquisition
* Operating leverage & tight cost control seen aiding profitability
* MTF surge, clients surge to aid earnings growth and return ratios
Alternate Stock Idea: Apart from 5 Paisa, in our coverage we also like MCX.
* MCX is a leader in commodity derivative exchanges in India with over 96% market share in commodities future space as on FY21
* BUY with target price of | 2,000
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