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Healthy client accretion; steady opex to aid earnings…

About the stock: 5paisa 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 retail cash market share ~of 3.5% as on March 2022

Q4FY22 Results: 5paisa reported a good performance on an overall basis

ADTO was up 23% QoQ amid robust client accretion at 3.59 lakh

Active clients jumped sharply 27% QoQ to 18 lakh

Revenue was up 10% QoQ and 78% YoY to | 88 crore, primarily led by 56% YoY uptick in brokerage revenue

Sequentially opex remained flattish at 2%. Thus, PAT was up ~3.5x QoQ to | 4.7 crore

What should investors do? 5 Paisa’s share price has grown by ~2x over the past two years from ~|178 to | 360 per share. Fintech offering in large opportunity market makes us positive on the future growth prospects

We retain our BUY rating on the stock

Target Price and Valuation: We value 5 Paisa at ~36x FY24E EPS and 3x FY24E revenue on FY24E estimates to arrive at revised target price of | 450 per share.

Key triggers for future price performance:

Focus on aggressive client accretion to aid ADTO and thereby topline

Opex getting steadier to aid earnings trajectory ahead

Strong focus on client activation to support ARPU and thereby revenue

Gain in market share ahead could command better multiple

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 ~94% market share in commodities future space as on FY21

BUY with a target price of | 2,000

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