Buy Affle India Ltd For Target Rs.1,350 - ICICI Direct
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Developed market impacts Q2; outlook 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
Q2FY23 Results: Affle reported weak Q2FY23 revenue numbers.
* Revenue grew 2% QoQ. Converted users grew 4.5% QoQ
* EBITDA margin improved ~20 bps QoQ to 20%
* Realisation declined 2.1% QoQ
What should investors do? Affle’s share price has grown by ~6.6x since listing [from ~| 174 (adjusted for split) in August 2019 to ~| 1154 levels in November 2022].
* We maintain BUY rating on the stock
Target Price and Valuation: We value Affle at | 1,350 i.e. 47x P/E on FY25E 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 million (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 29.6% revenue growth in FY22-25E (organic & inorganic combined)
Alternate Stock Idea: Apart from Affle, in our IT coverage we also like Persistent
* Consistent growth aided by continued strong TCV and inorganic opportunities
* BUY with a target price of | 4370
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