Target: ₹2,700
CMP: ₹2,337.15
We initiate coverage on Angel One with a Buy rating and a target price of ₹2,700, valuing the company at 19x FY27e EPS of ₹141. The company is amongst the largest retail brokers in India, with over 32 million clients, of which 9 million+ are NSE active.
Starting out as a regular offline broker in 1996, the company quickly pivoted to online discount broking in FY20. It saw strong growth across parameters with client base growing at 68 per cent CAGR, net revenue at 80 per cent CAGR and PAT at 90 per cent CAGR over FY20-FY24. Starting in FY24, Angel One has entered adjacent business lines within financial services, including wealth management, asset management, loan origination and life insurance even as regulations around the derivatives business have evolved.
Despite regulatory changes with concerns around retail losses in the derivatives segment, the industry has become fairer with up-streaming of client funds, true-to-label charges and limited number of expiry days. Angel One navigated these to maintain FY25 PAT at FY24 levels, even as it invested in adjacent business lines.
As the company is incrementally farming its existing client base, we expect revenue to be more recurring, providing a steady runway while it resumes its hunt to return to previous levels as the cost of acquisition normalises.