Buy Angel One for the Target Rs 420 by Motilal Oswal Financial Services Ltd
Improving operational efficiency drives an 18% PAT beat
* Angel One’s (ANGELONE) total income stood at INR11b (up 24% YoY/down 3% QoQ), in line with our estimates. The sequential decline was largely driven by a slowdown in market activity across segments.
* Total operating expenses grew 6% YoY/12% QoQ to INR7.4b (9% below est.), with employee expenses rising 10% QoQ (in line) and admin expenses growing 14% QoQ (13% below est.). Operating margin was 32.7% in 1QFY27, compared to 21.8% in 1QFY26. ? Better-than-expected efficiency in client acquisition expenses resulted in an 18% PAT beat, with PAT coming in at INR2.3b, doubling YoY/declining 28% QoQ.
* ANGELONE delivered an operating margin of 44% despite absorbing ~400bp of investment burn from its wealth management and AMC businesses. Management expects the core business to operate at over 45% margins, with benefits from emerging businesses expected to accrue gradually over the long term.
* We raise our FY27/FY28 EPS estimates by 1%/3%, considering the strong surge in the MTF book and robust operational efficiency, offset by a lower order run rate. We reiterate our BUY rating on the stock with a revised TP of INR420 (premised on 24x FY28E EPS).
Broking and distribution activity slows down; MTF continues to thrive
* Gross broking revenue at ~INR8.6b grew 25% YoY/declined 3% QoQ (5% beat) in 1QFY27. The sequential decline in broking revenue was driven by a decline in the F&O segment (F&O brokerage dipped 6% QoQ; in line). Cash brokerage rose 13% YoY/26% QoQ (20% beat), driven by higher ticket sizes and strong traction in the value-added plan on the AP channel, which carries higher realization. Commodity brokerage increased 25% YoY/remained flat QoQ (4% beat).
* ANGELONE’s order run rate was 6.8m per day in 1QFY27, declining from 7.2m in 4QFY26, driven by a 6% QoQ decline in F&O orders. Cash market order run rate remained flat. The commodity segment witnessed a 7% QoQ drop in orders to 40m from an all-time high of 43m in 4QFY26.
* Average client funding book grew 5% QoQ to INR61.4b. Net interest income grew 23% YoY/5% QoQ to INR3.4b. The exit MTF book for 1QFY27 stood at INR71.5b (INR54.5b in 4QFY26), with 365,000+ clients using the product as of 30th Jun’26.
* During the quarter, 1.7m unique SIPs were registered, with AUM growing to INR206b (INR167b at the end of 4QFY26). Credit disbursal declined 13% QoQ to INR5.3b. Distribution income fell 27% QoQ to INR429m, driven by a slowdown in credit and a seasonally slower quarter with respect to insurance sales.
* Wealth management AUM grew 33% QoQ to INR134.4b, with ARR contribution at 91%. The segment currently services 2,400+ clients with a team of more than 260 members.
* Asset management AUM stood at INR6.2b as of Jun’26. The AUM is spread across 11 live schemes with several folios growing to over 255,000.
* Employee expenses remained largely flat YoY/rose 10% QoQ to INR2.7b (in line), driven by annual increments, proportionate provisioning of variable pay for FY27, and higher ESOP expenses on account of issuance of fresh grants in 1QFY27.
* Admin expenses grew 12% YoY to INR4.7b (13% below est.) and include IPL spends of INR1.4b. Ex-IPL costs, opex declined due to lower client acquisitionrelated costs.
* Operating margin stood at 32.7% in 1QFY27, compared to 21.8% in 1QFY26. Normalizing for IPL costs, the margin was at 43.6% for the quarter.
Valuation and view
* A sequential decline in revenue in 1QFY27 was attributed to a drop in F&O activity, even though cash activity continued to surge, while the commodity segment remained flat. The new business of loan distribution witnessed some slowdown during the quarter. Other new businesses, such as the distribution of fixed deposits, wealth management, and AMC, are likely to gain traction over the medium term.
* On the cost front, while employee expenses remained stable, the company reported a decline in customer acquisition costs, ex-IPL spends, reflecting improved operational efficiency.
* We raise our FY27/FY28 EPS estimates by 1%/3%, considering the strong surge in the MTF book and robust operational efficiency, offset by a lower order run rate. We reiterate our BUY rating on the stock with a revised TP of INR420 (premised on 24x FY28E EPS).
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