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Revenue growth continues to be robust…

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

* In FY19-21, revenue, PAT have grown at a CAGR of 44%, 45%, respectively.

Q1FY22 Results: Affle reported robust Q1FY22 results

* Revenues increased 7.7% QoQ, 69.8% YoY to | 152.5 crore

* EBITDA margin declined 130 bps QoQ to 23%

* Adjusted PAT increased 11.2% QoQ, 57.2% YoY to | 29.5 crore

What should investors do?

Affle’s share price has grown by ~5x since listing (from ~| 843 in August 2016 to ~| 4,210 levels in August 2021).

* Although we maintain BUY rating, margin dilution prompts us to revise target price downwards from | 6,225 to | 5,635

Target Price and Valuation: We value Affle at | 5,635 i.e. 65x P/E on FY23E EPS

Key triggers for future price performance:

* Key beneficiary of a shift of advertising budget to digital medium

* Increasing smart phone penetration and rising online shoppers (from 120 million to 450 million, CAGR of 24% in the next five years) is expected to drive 35% CAGR in the Indian region (50% of revenues)

* Affle expects organic growth of 25-30%. We expect organic revenue to grow at 35% CAGR over FY21-23E

* We expect 58% revenue growth in FY21-23E (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

* BUY with a target price of | 1,250

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