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Stellar performance amid a volatile equity market

PAT grew 24% QoQ and 101% YoY to INR2b (17% beat) in 4QFY22. The beat in profitability was driven by a 11% beat on operating revenue, which rose 16% QoQ and 77% YoY to INR4.1b. Key contributors were a 13% beat in net revenue from the Broking segment and 6% beat on net interest income.

The active client ratio improved substantially in 4Q to 40.2% from 39.7% in 3QFY22.

Operating expense stood at INR2.3b (inline).

CIR improved substantially to 45.1% (est. 49.3%) as compared to 49% in 3QFY22 and 51% in 4QFY21.

Number of orders rose to 221m in 4QFY22 from 180m in 3QFY22.

Beat on Broking and interest revenue; F&O share continues to rise

Operating revenue grew a strong 16% QoQ and 77% YoY to INR4.1b (11% ahead of our estimate), driven by a healthy performance across Broking and interest income. Growth in the Broking business was driven by the F&O segment, which saw a strong growth (up 117% YoY and 21% QoQ) at INR3.7b, whereas revenue from Cash Broking fell 9% YoY and 6% QoQ to INR857m. The share of the F&O segment in gross Broking revenue further increased to 78% in 4QFY22 v/s 74% in 3QFY22.

Although the share of flat fees in total net income rose 2x to 83% in 4QFY22 (from 43% in 4QFY20), average revenue per client (ARPC) fell 0.2x, demonstrating the robustness of the business. On a quarterly basis, the average revenue per client fell to INR513 in 4Q from INR528 in 3QFY22.

Other income grew 10% QoQ and 43% YoY to INR1b (inline).

Lower OPEX drives improvement in the C/I ratio

Total OPEX grew 5% QoQ and 48% YoY to INR2.3b (inline). Operating efficiencies have started to play out, with CIR down 45.1% v/s 51.5% YoY

Employee costs grew 49% YoY, but fell 4% QoQ to INR749m (16% below out estimate). In 4QFY22, the company hired one more member in its digital team, taking its digital talent pool to 610. Employee cost, as a percentage of operating revenue, fell 15% sequentially

Administration costs rose 10% QoQ to INR1.5b (11% above our estimate).

Valuation and view

ANGELBRK is a perfect play on: 1) the financialization of savings, and 2) digitization. It demonstrated a strong performance across key operating parameters in 4QFY22. As guided by the management, it continues to invest in technology and strengthen its position. The client addition trajectory for the industry as well as ANGELBRK will continue, led by stark under penetration The cyclicality in revenue is much lower for Discount Brokers v/s their Traditional counterparts due to the shift towards a flat fee revenue model. We look to review our estimates and TP post the concall on 21st April’22.

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