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A steady quarter

Angel One reported PAT of INR 2.1bn, +85% QoQ, -50% YoY. While growth in net broking was weak with orders growing just 4% QoQ, average client funding book growth was strong at 24%. Expenses moderation was led by seasonal IPL expenses in base (1QFY26) compensated by higher customer acquisition costs (+12% QoQ) – which should support growth going forward. The company maintained its guidance of 40-45% operating profit margins by 4QFY26, despite the INR 1bn of losses on the Asset and Wealth Management businesses. While any regulatory action on derivatives market remains a concern, we remain positive on the medium-term outlook of the company, with growth coming first from funding book and then distribution, aiding the strong broking business. We cut our FY26e EPS by 2%, but raise FY27/FY28e EPS by 5%/2%. We raise our target price to INR 2,900, valuing the company at 20x FY27e EPS of INR 148 (against 19x FY27e of INR 141 earlier). We maintain BUY.

* Weak broking growth supported by expanding client funding book and cash fee relook:

Angel One saw a modest 4% growth in number of orders to 360mn, as the company recovers from a decline in market volumes. Management maintained its target of around 6.8mn orders per day by 4QFY26, gradually growing from 4.8mn in Feb’25. Growth in client funding book was strong, with the average book growing 24% QoQ to INR 53bn and the closing book 11% ahead of this average at INR 59bn+. Revenues were supported by realignment of charges on cash orders, with a floor of INR 5 per order, at a run-rate of INR 500-600mn per year, which should accrue hereon. Distribution continues to scale, with disbursements doubling QoQ to INR 4.6bn, leading to cumulative disbursements of INR 14bn. The wealth management business continues to scale, with an AUM of INR 61bn. Management mentioned that the burn rate on the Asset and Wealth Management businesses remain around INR 1bn per year. While the wealth management business is expected to breakeven in 2.5-3 years, the AMC is expected to take 7-8 years to breakeven.

* Higher expenses driven by elevated customer acquisition costs:

The company had spent INR 1.1bn on IPL branding in 1Q, hence, expenses fell 11% sequentially. Expenses were 1% ahead of JMFe, explained by a 12% growth in customer acquisition costs, in line with a 13% growth in gross clients acquired in 2Q. This should support order volumes going into 2H as the company looks to raise the number of orders per day run-rate closer to 7.0mn, from 5.8mn levels over August-September. While revenues were 2% below JMFe and costs 1% higher, PAT miss was also led by a higher tax rate of ~28%. Management maintained its guidance of 40-45% operating margins by 4QFY26.

* Valuations and view – outlook steady, see a favourable risk-reward despite the regulatory question:

While any regulatory action on derivatives market remains a concern, we remain positive on the medium-term outlook of the company, with growth coming first from funding book and then distribution, aiding the strong broking business. We cut our FY26e EPS by 2%, but raise FY27/FY28e EPS by 5%/2%. Earnings quality and EBDAT margins would improve as the newer businesses scale up. While we cut our FY26e EPS by 2%, but raise FY27/FY28e EPS by 4%/2%. We raise our target price to INR 2,900, valuing the company at 20x FY27e EPS of INR 148 (against 19x FY27e of INR 141 earlier). We maintain BUY.

Key concall takeaways

* Broking business

* Management expects to reach a daily order run-rate of 6.8-6.9mn orders by 4QFY26

* Expect the broking business to grow at 25-30% in the medium to long term;

* Management declined to comment on potential regulatory action on the derivatives market;

* The company simplified its pricing structure, making it same for both delivery and intra-day trading of 0.1% of the order value, within the range of INR 5 to INR 20 per order

* This generated additional revenues at a run-rate of INR 500-600mn per year.

* Asset and Wealth Management New growth drivers

* Angel One's mutual fund AUM grew from to INR 4bn, +17% QoQ - spread across nearly 140k folios;

* Launched two new offerings in the commodity segment namely Angel One Gold ETF and Angel One ETF FOF

* total of 7 Schemes across segments;

* Wealth AUM has reached AUM of INR 61bn with over 1,250 clients across 9 cities;

* The wealth management division has 200 total employees, including 85 client facing staff, 40 tech engineers, and 29 domain experts.

* Other businesses

* Joint Venture with LivWell Company Holdings, PTE Limited Singapore for expansion in Insurance

* Angel One has 26% stake, which it acquired for INR 4bn,

* Management emphasised its continued focus on distribution, rather than manufacturing insurance products;

* Credit distribution grew doubled to INR 4.6 bn in 2Q, taking cumulative distribution to INR 14bn

* The company added Poonawalla Fincorp as a partner in this quarter.

* Distribution income witnessed growth of 28% QoQ driven by nearly two-fold jump in sale of credit products, robust IPO market and sustained growth in mutual funds.

* Operating Profit margins

* Management maintained its guidance of 40-45% operating profit margin (OPM) by 4QFY26

vWealth Business is expected to breakeven in next 2-3 years and the AMC in 7-8 years;

* Expect OPM to reach 45-50% in the longer-term, through optimising costs through AI, growth in run-rates and growth in distribution business;

* Increase in Other expense is due to a 12% growth in Customer Acquisition Cost (CAC), which is in line with a 13% growth in customer acquisition on a gross basis.

Quarterly Charts

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SEBI Registration Number is INM000010361