Buy Affle India Ltd For Target Rs.1140 - ICICI Direct
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Seasonally weak quarter; outlook remains strong
About the stock: Affle India (Affle) is a technology platform that enables advertisers to do targeted advertising.
* It helps advertisers to measure the effectiveness of advertisement as it charges only when a user downloads an app or completes a transaction
* As on FY22, 99.1% business comes from consumer platforms while the rest comes from enterprise platforms
Q4FY22 Results: Affle reported Q4FY22 results that were seasonally weak.
* Revenues declined 7.2% QoQ; converted users declined 3.2% QoQ
* EBITDA margin dropped 142 bps QoQ to 18.5%
* Converted users grew 85% YoY to reach 195.3 mn in FY22
What should investors do? Affle’s share price has grown by ~5.5x since listing (from ~| 174 [adjusted for split] in August 2019 to ~| 970 levels in May 2022).
* We maintain BUY rating on the stock
Target Price and Valuation: We value Affle at | 1,140 i.e. 43x P/E on FY24E EPS
Key triggers for future price performance:
* Key beneficiary of a shift of advertising budget to digital medium Six billion connected consumer devices to be added globally by 2025
* Significant increase in India’s digital user base from 525 mn in FY20 to 902 mn by FY25E at 11.4% CAGR while mobile ad spend is expected to rise at 32.4% CAGR in the same period
*We expect 32% revenue growth in FY22-24E (organic & inorganic combined)
Alternate Stock Idea: Apart from Affle, in our IT coverage we also like Just Dial.
* Change in promoters and shift of advertising to digital medium key positives
* HOLD with a target price of | 900
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