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Our view – Angel One displays that soft third quarter was a one off

Angel One closes out the year with strong traction for broking business on sequential basis: 2.9mn clients were acquired during the quarter, taking the client base to 22.2mn. The company is focusing on client addition since the unit economics is attractive. The lifetime of value of new cohorts of customers from tier 3 and beyond and from millennial and gen Z base is 7x of acquisition cost whereas the company is profitable even at a 5.5- 6x ratio. The number of orders executed amounted to 471mn during the quarter, up 79% YoY and 35% QoQ. The rise in order volume has been driven by increased client addition as well as activity of vintage clients.

Interest income also rose in healthy fashion on sequential basis, with strong outlook: Average client funding book was up 9.1% QoQ to Rs 20.3bn. Higher activity on the cash side has aided the client funding book. Interest from client funding and other sources rose 16% QoQ and formed 18% of total gross revenue. There was a restriction on the client funding book, which has now opened up due to capital raise and it is reasonable to assume the client funding book would reach Rs 30bn in 2 years, though the aspiration is even higher.

Management has outlined its plans for various new business initiatives: We think there is considerable optionality, not baked into our or street numbers, that emerges from the lending, asset management and wealth management businesses.

We maintain ‘BUY’ rating on Angel One with a revised price target of Rs 3750: We value the broker at 22x FY26 P/E for an FY24-26E EPS CAGR of 12%.

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

* Revenue: Net Revenue at Rs. 10,599mn was up 28.3%/65.9% QoQ/YoY, where the net fees and commission income has grown by 34%/67% QoQ/YoY

* Client Base: The total client base stood at 22.2mn up by 13.8%/61% QoQ/YoY and the NSE active client base was at 6.1mn up by 15.1%/41.9% QoQ/YoY

* Volume: The total order volume was 471mn, up by 35%/79% QoQ/YoY where the F&O volume was at 355mn, up by 36%/65% QoQ and YoY

* Client Funding Book: The average client funding book stood at Rs. 20,290mn, and have grown by 9.1% QoQ and 54.4% YoY

* Operating profit margin: Operating profit margin for the quarter, at 44.7%, was up 87 bps QoQ but down -1243 bps YoY

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