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Regulatory changes seem manageable

Our view – Business traction remains sound as well

Regulatory aspects – Management commentary seems to suggest that the impact from various regulatory changes will be well contained: In terms of the impact of the SEBI Circular on Equity Index Derivatives, management stated that it is very difficult to quantify the impact but they estimate that revenue from broking and related activity would erode by 13-14% on an immediate term basis. This erosion should be viewed in the context of a 50-60% run rate for customer addition, which means that the impact would be negated in a quarter or two. The company had previously announced measures to mitigate the impact of True-to-label norms

Traditional businesses – Underlying business traction was healthy on sequential basis even as the company awaits the impact of various changes: 3.0mn clients were acquired during the quarter, taking the client base to 27.5mn. The number of orders executed amounted to 489mn during the quarter, up 44.7% YoY and 5.8% QoQ. Gross broking revenue at Rs 9.36bn was 61.8% of total revenue and was up 28.7% YoY. Average client funding book was up 48% QoQ to Rs 38.89bn. Interest from client funding and other sources rose 22% QoQ and formed 24% of total gross revenue.

New businesses – New businesses remained in investment phase, while holding the promise of revenue payback: The overall impact of incubating the wealth and asset management businesses has been 1.8% of operating profit margin. The reported EBDAT margin of the consolidated business was 49.9%, which would otherwise have been 51.5%.

We maintain ‘BUY’ rating on Angel One with a revised price target of Rs 3875: We value the broker at 25x FY26 P/E for an FY24-27E EPS CAGR of 11.5%

Other Highlights (See “Our View” above for elaboration and insight)

* Revenue: Net Revenue at Rs. 11,971mn was up 8.0%/47.0% QoQ/YoY, where the net fees and commission income has grown by 4.7% QoQ and 37.9% YoY

* Client Base: The total client base stood at 27.5mn up by 11.3%/60.8% QoQ/YoY and the NSE active client base was at 7.4mn up by 9.7%/50.1% QoQ/YoY

* Volume: The total order volume was 489.2mn, up by 5.9%/44.7% QoQ/YoY where the F&O volume was at 349mn, up by 0.3%/32.2% QoQ/YoY

* Client Funding Book: The average client funding book stood at Rs. 38,890mn, and have grown by 48.2% QoQ and 176.4% YoY

* Operating profit margin: Operating profit margin for the quarter, at 49.8%, was up by 1241 bps QoQ but down -138 bps YoY

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