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Affle Stock Pricing
Affle Stock Pricing
3R MATRIX + = -
Reco/View: Buy CMP: Rs. 1,168 Price Target: Rs. 1,400 á
Right Sector (RS) ü
á Upgrade Maintain â Downgrade
Right Valuation (RV) ü Strong revenue growth, led by robust organic growth and higher incremental revenue
contribution from the Jampp acquisition; EBITDA margins contracted by 656 bps y-o-y
+ Positive = Neutral – Negative owing to negative impact of Jampp’s consolidation.
Improvement in Jampp’s performance in Q2FY22 remains encouraging; Jampp’s EBITDA
margins are expected to improve to high single-digits over one year from 5% currently and
to ~20% over the next 1.5-2.5 years.
What has changed in 3R MATRIX The management remains confident of posting better growth than the digital advertising
industry’s average (25-30% CAGR in the medium term); we expect Affle to clock revenue/
Old New earnings CAGR of 26%/32%, respectively over FY2022-24E
We maintain a Buy on Affle (India) Ltd with a revised PT of Rs. 1,400, given its unique CPCU
RS business model, expansion into new geographies and greater adoption of its platform.
RQ Affle (India) Limited (Affle) delivered another quarter of strong revenue growth led by robust
organic growth and higher incremental revenue contribution from acquisition of Jampp,
RV while EBITDA margins declined by 656 bps y-o-y owing to the consolidation impact of the
acquisition. Revenues grew by 103.6% y-o-y to Rs. 274.7 crore, aided by Rs. 82.4 crore of
incremental revenue contribution from Jampp acquisition. We believe that the company has
done a commendable job in improving the performance of Jampp in terms of both revenue (Rs.
82.4 crore versus ~Rs. 54 crore quarterly revenue in CY2020) and EBITDA margins (improved
Company details to 5% from breakeven level in CY2020). The management remains confident to deliver
better than the average of the digital advertising industry growth rate going ahead, which
Market cap: Rs. 15,559 cr is expected to grow at 25-30% CAGR in the long term. We believe Affle is well-positioned to
deliver a revenue CAGR of 26% over FY2022-FY2024E on the back of its leadership position
52-week high/low: Rs. 1,259/561 in emerging markets, expansion into developed markets and increasing budget towards
mobile advertising.
NSE volume: Key positives
1.2 lakh
(No of shares) Stronger-than-expected revenue growth; revenue grew by 103.6% y-o-y.
BSE code: 542752 Converted users grew by 73.3% y-o-y
Strong recovery in Jampp’s performance post acquisition
NSE code: AFFLE Key negatives
EBIT margin of international markets declined to 20.8% from 31.4% in Q2FY2021
Free float:
5.3 cr Weak operating cash flow; OCF to net profit ratio stood at 18% versus 139% in Q1FY2022
(No of shares)
Management Commentary
Affle would grow better than the average digital advertising industry growth rate in the
medium term
Shareholding (%) India business would continue to contribute 30% to its total revenue going ahead.
Jampp’s EBITDA margin would improve to around high single-digits over the next one year
Promoters 60 and ~20% over next 1.5-2.5 years.
Revision in estimates – We raised our earnings estimates FY22E/FY23E/FY24E given strong
DII 7 beat on revenue and net profit and better-than expected performance of Jampp .
Our Call
FII 22
Valuation – Strong growth momentum to continue: Affle India is better placed to capture
Others 12 opportunities from favourable industry tailwinds given its competencies in both in-app and
on-device ecosystems, end-to-end offerings in the CPCU business model and a first-mover
advantage in emerging markets. We forecast Affle India’s revenues and earnings to report a
CAGR of 26% and 32%, respectively, over FY2022-FY2024E. At CMP, the stock trades at 68x/50x
Price chart its FY2023E/FY2024E earnings. We continue to like Affle given its strong balance sheet, greater
adoption of its platform, strengthening relationships with advertisers directly and a long runway
1,300 for growth. Hence, we maintain a Buy rating on the stock with a revised PT of Rs. 1,400.
1,100 Key Risks
(1) Entry of a large technology player in this space; (2) Inability to generate relevant data for
900 targeted advertisers; and (3) Government regulations related to management of consumer data
700 and respect for privacy.
500 Valuation Rs cr
Particulars FY21 FY22E FY23E FY24E
Mar-21
Jul-21
Nov-20
Nov-21
Margins to expand in the medium-term: The company’s EBITDA margin contracted sharply (down 656
bps y-o-y) in Q2FY2022 owing to impact of consolidation of Jampp acquisition. The management remains
confident of expanding the margins to high single digits and around 20% over next one year and over
next 1.5 – 2.5 years respectively on the back of optimisation of the acquired entity’s business model
and platform. However, thewould continue to invest through organic and in-organic route to deepen the
market penetration and enhance tech capabilities.
Consistent growth in advertising spend across its top verticals: Affle has divided its high-growth verticals
in four categories (E, F, G, and H), which contributed over 90% to its total revenue in Q2FY2022 as against
74% in FY2020. Management witnessed strong traction for its offerings across category E (E-commerce,
Entertainment, EdTech), category F (Fintech, Foodtech, and FMCG), category G (Gaming, Groceries, and
Government),and category H (Healthtech). The management indicated that the company witnessed
consistent growth across these verticals as advertisers in these industry verticals have been digital much
faster than earlier.
Weak cashflow: Cash flow from operations stood at Rs. 7.6 crore in Q2FY2022, implies a cash conversion
to net profit ratio of 18% versus 139% in Q1FY2022.The management highlighted that it continues to focus
on working capital management and positive cash flow from operations in coming quarters.
Focus on 2V strategy: The management indicated that it would continue to invest 2V strategy along
with emphasis on the vertical omni-channel integration to further strengthen market position and expand
reach across connected devices. The company takes different approaches, including proximity marketing,
connected TV medium and partnership with OEMs to reach its customers through the 2V strategy. The
management highlighted that the company’s focused execution on Affle 2.0 strategy enabled it to drive
deeper verticalisation for its advertisers across top 10 verticals. Further, it highlighted that the demand for
visual ad would continue to remain strong for the next 3-5 years.
Commentary on tech IP creation: The management highlighted that the company’s consistent focus on
R&D and IP creation has consistently delivered value to customers and partners. The company recently
got three patent grants in the USA, taking total patent grants to six in the USA. IPs will lay-out strategic
long-term growth direction for the company and also will provide defensive strategy in the developed
markets.
Results (Consolidated) Rs cr
Particulars Q2FY22 Q2FY21 YoY (%) Q1FY22 QoQ (%)
Net sales 274.7 135.0 103.6 152.5 80.2
Inventory and data costs 175.5 77.7 125.9 88.4 98.5
Employee expenses 31.4 13.1 138.6 18.8 67.2
Other expenses 15.8 9.7 62.8 10.2 54.7
EBITDA 52.0 34.4 51.2 35.1 48.4
Depreciation 8.1 5.1 58.0 5.2 55.3
EBIT 44.0 29.3 50.0 29.9 47.2
Other Income 15.2 1.6 831.0 12.7 20.0
Finance cost 2.2 0.9 145.9 1.4 54.1
PBT 57.0 30.1 89.7 41.2 38.6
Total tax 9.2 3.1 199.0 5.3 75.0
Reported net profit 47.6 26.9 77.1 35.7 33.3
Adjusted net profit 41.9 26.9 55.9 28.5 46.9
Adjusted EPS (Rs.) 18.1 10.6 70.9 13.7 32.2
Margin (%) BPS BPS
EBITDA 18.9 25.5 -656 23.0 -405
EBIT 16.0 21.7 -571 19.6 -358
Adjusted NPM 17.3 19.9 -259 23.4 -610
Tax rate 16.1 10.2 590 12.8 336
Source: Company, Sharekhan Research
110 103.6
100
90
76.9
80 69.8
70
%
59.3 59.3
60
50 40.4
37.1
40 32.3
27.0
30 20.4
20
10
Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22 Q2FY22
31
28.9
29
26.4
27 25.7 25.5 25.5
25.0 25.0
24.4
25
%
23.0
23
21
18.9
19
17
15
Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22 Q2FY22
6 100
85.3
81.6
4.9 80
5
51.9 46.4 73.3 60
4
43.4
35.0 3.2 40
3.1 3.0
No in crore
3 21.6 2.8
2.1 2.4 20
1.9 1.7
2 1.7 1.6
0
1 -20
0 (27.2) -40
Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22 Q2FY22
Converted user (no in crore) Growth y-o-y (%)
100
90
80
70
60
P/E (x)
50
40
30
20
10
0
Aug-19 Dec-19 Mar-20 Jul-20 Nov-20 Mar-21 Jul-21 Nov-21
P/E (x) Avg. P/E (x) Peak P/E (x) Trough P/E (x)
Peer Comparison
CMP Mcap P/E (x) EV/EBITDA (x) P/BV (x) RoE (%)
Shares
Company Rs./ Rs.
Crore FY22E FY23E FY22E FY23E FY22E FY23E FY22E FY23E
Share crore
Just Dial 785 6,563 41.9 24.2 45.2 16.9 3.8 3.4 5.4 8.1 785
Info Edge* 6,404 82,467 163.0 126.8 149.7 115.4 16.6 15.0 10.2 11.9 6,404
Affle India 1,168 15,559 86.3 67.6 79.5 58.4 28.8 20.2 33.4 29.9 1,168
Source: Sharekhan Research, Bloomberg
*Standalone
About company
Affle is a global technology company with a leading market position in India. The company has two business
segments, i.e. (1) consumer platform and (2) enterprise platform. The consumer intelligence platform delivers
consumer engagement, acquisitions, and transactions for leading brands and B2C companies through
relevant mobile advertising. Affle aims to enhance returns on marketing spend through delivering contextual
mobile ads and reducing digital ad fraud, while proactively addressing consumer privacy expectations. The
enterprise platform helps offline companies to go online through platform-based app development, enabling
of O2O (online to offline) commerce, and data analytics.
Investment theme
Affle, a leading adtech company in India, provides end-to-end offerings to advertisers through mobileadvertising
using its proprietary mobile audience as a service (MAAS) platform for customers. Given its deep learning
algorithm capabilities and ability to deliver more targeted and personalised advertisements, more advertisers
have been using the consumer platform for running their digital ad campaigns on its platform. With increased
share of digital ad spends and shifting of advertisers towards programmatic advertising, ad-tech vendors
such as Affle are well placed to deliver higher growth going ahead.
Key Risks
(1) High client concentration; (2)entry of large tech player in this space; and (3) inability to generate actionable
outcomes for targeted advertisers.
Additional Data
Key management personnel
Anuj Khanna Sohum Founder, Chairman & CEO
Anuj Kumar Co-founder, Chief revenue & operating office
KapilBhutani Chief financial&operationsofficer
Mei Theng Leong Chief finance & commercial officer
Vipul Kedia Chief data and Platforms officer
Source: Bloomberg
Top 10 shareholders
Sr. No. Holder Name Holding (%)
1 Abrdn PLC 4.76
2 MALABAR INDIA FUND LTD 4.48
3 Nomura India Investment 1.79
4 ABERDEEN STD ASIA FO PLC 1.63
5 Nippon Life India Asset Management 1.62
6 Franklin Resources Inc 1.29
7 Vanguard Group Inc 1.18
8 William Blair & CO LLC 0.96
9 Blackrock Inc 0.64
10 Blackstone Asia Advisors 0.63
Source: Bloomberg
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