17 July 2023 Company Update

Angel One
Signs of fatigue setting in; downgrade to ADD ADD
ANGELONE printed a 2.5% QoQ decline in its top line, driven by moderation CMP (as on 14 Jul 2023) INR 1,708
in the number of orders (-5% QoQ) and lower ancillary transaction revenues (-
Target Price INR 1,815
19% QoQ). Staff costs spiked once again and are expected to stay elevated on
the back of its sustained efforts on scaling up and investing in additional tech NIFTY 19,565
talent. ANGELONE has been inconsistent in its intent and ability to align
marketing dollars with the pace of customer adds, thereby impacting margins; KEY
OLD NEW
CHANGES
we continue to monitor these expenses in a soft customer add environment,
especially with the quality of recent-vintage clients on the decline. The 6-month Rating BUY ADD
NSE ban on onboarding new APs notwithstanding, given the flat-fee model, Price Target INR 1,800 INR 1,815
ANGELONE is one of the best medium-term plays on the secular growth story FY24E FY25E
in Indian capital markets. However, the steep 70% up-move in the stock over EPS%
0% 0%
the past 6 months robs us of any short-term material upside from current levels;
we downgrade to ADD with a target price of INR1,815 (15x Mar-25E EPS).
KEY STOCK DATA
 Negative surprise on opex: Net broking revenues clocked a 5% sequential de-
Bloomberg code ANGELONE IN
growth at INR3.96bn, despite all-time high retail derivative ADTVs on the
back of a moderation in the number of orders and softer F&O mix. Staff costs No. of Shares (mn) 84
shot up by >60% QoQ on the back of continued hiring in the digital pool. Staff MCap (INR bn) / ($ mn) 143/1,751
and admin expenses together accounted for over 51% of revenues, thereby
6m avg traded value (INR mn) 641
driving the EBITDA margin lower by 900bps QoQ to 48.6% and APAT to
INR2.21bn (-17% QoQ, -7% vs. estimates). 52 Week high / low INR 1,805/999

 Growing signs of fatigue: Despite sustained momentum in customer adds

STOCK PERFORMANCE (%)
(+2.5% QoQ), the ARGOs (average revenue-generating orders) are declining,
indicating muted activation rates. Our analysis suggests that activation rates 3M 6M 12M
on a 12m rolling basis are now in single-digit territory (8%) and have sharply Absolute (%) 35.2 30.9 30.2
moderated for the past couple of quarters. Clients with high trading intent
Relative (%) 25.9 21.3 6.5
need lesser nudges, reflecting in low activation costs—this has been one of the
biggest moats for ANGELONE, which is now being challenged. This is also
SHAREHOLDING PATTERN (%)
reflected in a gradual rise in net broking revenue contribution from vintage
customers, implying lower revenue contribution from first-year clients. Mar-23 Jun-23

 Downgrade to ADD: In an order issued over the weekend, the NSE imposed Promoters 38.5 38.3

a 6-month ban on the company on-boarding any new Authorised Persons FIs & Local MFs 10.7 11.4
(APs). This ban notwithstanding, given the flat-fee model, ANGELONE is one FPIs 16.6 17.0
of the best medium-term plays on the secular growth story in Indian capital
Public & Others 34.2 33.3
markets. However, the steep 70% up-move in the stock over the past 6 months
robs us of any short-term material upside from current levels; we downgrade Pledged Shares Nil Nil
to ADD with a target price of INR1,815 (15x Mar-25E EPS). Source : BSE

Quarterly financial summary

(INR mn) Q1FY24 Q1FY23 YoY (%) Q4FY23 QoQ (%) FY23 FY24E FY25E
Adj. revenues 6,288 5,153 22.0 6,443 -2.4 22,849 25,159 27,410
EBITDA 3,058 2,492 22.7 3,707 -17.5 12,140 12,963 14,281
Margin (%) 48.6 48.4 26bps 57.5 -890bps 53.1 51.5 52.1
APAT 2,208 1,816 21.6 2,670 -17.3 8,838 9,430 10,366
AEPS 26 21 21.8 31 -17.4 105.9 113.0 124.3
EV/EBITDA (x) 11.7 9.9 8.7
P/E (x) 16.2 15.2 13.8
Krishnan ASV
ROE (%) 47.2 38.6 34.1
venkata.krishnan@hdfcsec.com
Source: Company, HSIE Research
+91-22-6171-7314

HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters
Angel One: Company Update

Consolidated P/L statement

(INR mn) Q1FY24 Q1FY23 YoY (%) Q4FY23 QoQ (%)
Adj revs 6,288 5,153 22.0 6,443 -2.4
Staff costs expected to Staff cost 1,232 1,016 21.3 755 63.3
remain elevated in FY24E on Admin and other exp 1,998 1,645 21.5 1,982 0.8

the back of continued senior EBITDA 3,058 2,492 22.7 3,707 -17.5
Depreciation & amortisation 89 65 37.9 89 -0.4
leadership hiring.
EBIT 2,969 2,428 22.3 3,618 -17.9
Finance costs 2 2 0.0 2 0.0
PBT 2,967 2,426 22.3 3,616 -17.9
Tax 759 611 24.3 946 -19.8
APAT 2,208 1,816 21.6 2,670 -17.3
RPAT 2,208 1,815 21.6 2,669 -17.3
Source: Company, HSIE Research

Segmental revenue break-up

(INR mn) Q1FY24 Q1FY23 YoY (%) Q4FY23 QoQ (%)
Broking (net) 3,955 3,216 22.9 4,142 -4.5
NII 1,266 1,020 24.2 1,173 7.9
Depositary charges Depositary 243 275 -11.4 183 33.1
witnessed QoQ growth as Distribution 81 51 57.5 83 -2.4
cash volumes picked up Ancillary transactional revenue 649 539 20.4 781 -16.9
sequentially Misc. income 81 51 57.5 83 -2.4
Total 6,275 5,153 21.8 6,446 -2.6

Ancillary transactional de- Revenue mix (%) Q1FY24 Q1FY23 YoY (%) Q4FY23 QoQ (%)
grew despite higher Broking (net) 63.0 62.4 60bps 64.3 -124bps
derivative volumes NII 20.2 19.8 39bps 18.2 197bps
Depositary 3.9 5.3 -145bps 2.8 104bps
Distribution 1.3 1.0 29bps 1.3 0bps
Ancillary transactional revenue 10.3 10.5 -12bps 12.1 -178bps
Misc. income 1.3 1.0 29bps 1.3 0bps
Total 100.0 100.0 100.0
Source: Company, HSIE Research

Page | 2
Angel One: Company Update

Strong growth in net broking revenues

INR mn Old plan Flat fee

4.4 4.1 4.0

Sequentially softer net
3.9 3.6 3.5
broking revenues due to dip 3.4
3.2 3.2
in F&O orders. 2.7
2.9
2.3
2.4 2.1
1.8 3.7 3.5
1.9 3.0 3.0
1.3 1.3 2.7 2.7
2.3
Broking revenue from flat 1.4 1.0 1.9
0.6 0.6 0.7 0.8 1.3 1.6
fees less vulnerable to 0.9 0.7 0.9
0.0 0.1 0.2 0.3 0.5
0.4
market cyclicality 0.6 0.5 0.5 0.4 0.5 0.6 0.5 0.5 0.5 0.4 0.4 0.5 0.5 0.5 0.5 0.4 0.5
-0.1
compared to old plan.

2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21

1QFY22

3QFY22
4QFY22
1QFY23
2QFY23

4QFY23
1QFY20

4QFY21

2QFY22

3QFY23

1QFY24
Source: Company, HSIE Research

Average orders per customer (ARGO) saw sharp moderation

ARGO/customer QoQ (%) - RHS

120 80
56
100 60

80 40
Despite sustained 60 11 20
3
momentum in customer -4 -3 -2
40 -12 -13 -12 -13 -10 0
additions, ARGOs are -18 -16 -15
-20
-25
declining, indicating muted 20 -20
activation rates. 50 79 59 52 45 40 32 33 27 23 22 22 18 18 16 18 15
0 -40
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22

4QFY22
1QFY23

3QFY23
4QFY23
1QFY20

3QFY22

2QFY23

1QFY24
Source: Company, HSIE Research

Total orders showcasing strong momentum sequentially

Revenue generating orders (mn) - LHS QoQ (%) - RHS

220 202 250

200 190
164 164 200
170 148 147
A sharp moderation in 123 150
ARGOs along with slower 120 100
84
70 100
growth in customer base 53 54 51 48 51
70
resulted in flat overall 38 46
19 21 20 23 20 23 50
11
0 0 -6
revenue generating orders. 20 2 7 0
11 17 26
1QFY20
2QFY20

4QFY20
1QFY21

3QFY21
4QFY21

2QFY22
3QFY22

1QFY23
2QFY23

4QFY23
1QFY24
3QFY20

2QFY21

1QFY22

4QFY22

3QFY23

-30 -50

Source: Company, HSIE Research

Page | 3
Angel One: Company Update

Traditional plan yields continue to face pricing pressure

Traditional plan yields (bps)
1.20
1.03
1.00

0.80
0.54
0.60 0.45
0.40 0.31
0.17 0.18
0.20

0.00

1QFY20

3QFY20
4QFY20

2QFY21
3QFY21
4QFY21
1QFY22

3QFY22
4QFY22

2QFY23
3QFY23
4QFY23
1QFY24
2QFY20

1QFY21

2QFY22

1QFY23
Source: Company, HSIE Research

Client additions: flat fee continues to dominate

Old plan Flat fee
1,500 '000s

1,366
1,300
Millennial customers (DIY

1,238

1,270
1,222
1,190

1,187
1,100

1,133
community) prefer the flat-

1,116
fee model 900

926
700 884
464
486

500
306

300
20 21 43
100 25 34 54
4QFY20 184

46 72 71 87 99 103 69 62 62 71 55
102
2QFY2089
48

-100
1QFY20

3QFY20

1QFY21

2QFY21

3QFY21

4QFY21

1QFY22

3QFY23

4QFY23

1QFY24
2QFY22

3QFY22

4QFY22

1QFY23

Source: Company, HSIE Research 2QFY23

Tier-3 cities continue to dominate client additions

% Tier 1 Tier 2 Tier 3 Customer additions - RHS

100 1,600

80 45
53 55 53 53 55 46 57 1,200
62 58 59 60 57 62 62 66 66
Tier-3 cities continue to 60
contribute an increasing 800
proportion of the total 40
41 38
customer additions 36 34 37 36 36 400
37 31 36 36 35 38 33 34
20 28 23
14 11 11 11 11 9 16 11
0 6 7 6 5 6 5 5 5 6 0
1QFY20

3QFY20
4QFY20

2QFY21

4QFY21
1QFY22

3QFY22

1QFY23
2QFY23
3QFY23
4QFY23
2QFY20

1QFY21

3QFY21

2QFY22

4QFY22

1QFY24

Source: Company, HSIE Research

Page | 4
Angel One: Company Update

EBITDA margin trends

EBITDA margin (%)
70.0
Steady state EBITDA 57.5
60.0 54.9 52.4 53.2
50.9 49.3 49.3 48.5 48.8 50.7 48.6
margins could now be 47.4 48.4
50.0
heading below 50% 35.9
39.1
40.0
30.1
30.0
20.0
10.0
0.0

3QFY20

4QFY20

1QFY21

3QFY21

4QFY21

1QFY22

2QFY22

4QFY22

1QFY23

2QFY23

4QFY23

1QFY24
2QFY20

2QFY21

3QFY22

3QFY23
Source: Company, HSIE Research

Strong focus on hiring digital talent

Strong focus on hiring
digital talent illustrates Digital pool (employees) As a % of total pool (RHS)
company’s focus on 21
20 20
running iterations in 1,000 18 22
17 18 18 18
existing app and building a 16
800 14 15 14 17
13 663
seamless Super app 12 609 610 630 633
10 567 603
600 496 12
450
358 335 330 343 369 388
400 7

200 2

0 -3
1QFY20

2QFY20

4QFY20

1QFY21

2QFY21

4QFY21

1QFY22

2QFY22

1QFY23

2QFY23

3QFY23
3QFY20

3QFY21

3QFY22

4QFY22

Source: Company, HSIE Research

Employee costs as a % of net revenues

Employee costs - LHS As a % of net revenues - RHS
Staff costs as a % of
INR mn
revenues have seen 1,800 37 40
sporadic trends, reflecting 31
inconsistent efforts at 1,400 28
30
aligning these investments 23
with the pace of customer 1,000 19 20 18 20 20 20 20
17 17 18 20
adds 15
600 12
1,016

1,095

1,114

1,232

10
368

359

397

445

592

688

749

755
424

373

503

780

200
3QFY20

4QFY20

2QFY21

3QFY21

1QFY22

2QFY22

4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24
2QFY20

1QFY21

4QFY21

3QFY22

-200 0

Source: Company, HSIE Research

Page | 5
Angel One: Company Update

Financials
Financials
Consolidated Income Statement
(Rs mn) FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Net Revenues 4,433 4,750 4,762 8,979 16,830 22,849 25,159 27,410
Growth (%) 38 7 0 89 87 36 10 9
Employee benefits expenses 1,250 1,592 1,598 1,718 2,809 3,979 4,277 4,577
Operating expenses 1,456 1,669 1,749 2,829 5,464 6,730 7,918 8,552
EBITDA 1,727 1,490 1,414 4,431 8,557 12,140 12,963 14,281
EBITDA margin (%) 39 31 30 49 51 53 52 52
EBITDA growth (%) 185 -14 -5 213 93 42 7 10
Depreciation 145 189 209 184 186 303 351 415
EBIT 1,582 1,301 1,205 4,248 8,370 11,837 12,613 13,866
Other Income (includes treasury ) 0 0 0 0 0 0 0 0
Interest & Financial Charges 0 19 18 8 3 6 6 8
PBT 1,582 1,282 1,187 4,240 8,367 11,831 12,606 13,858
Tax 508 448 320 1,166 2,117 2,994 3,177 3,492
APAT 1,075 834 868 3,073 6,251 8,838 9,430 10,366
APAT Growth (%) 256 -22 4 254 103 41 7 10
Minority Interest 0 0 0 0 0 0 0 0
RPAT 1,075 798 823 2,969 6,248 8,900 9,430 10,366
RPAT Growth (%) 256 -26 3 261 110 42 6 10
AEPS (diluted) 15 12 12 38 75 106 113 124
AEPS Growth (%) 255 -22 4 212 101 40 7 10
Source: Company, HSIE Research
Consolidated Balance Sheet
(Rs mn) FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
SOURCES OF FUNDS
Share Capital 720 720 720 818 829 834 834 834
Reserves 4,029 4,594 5,194 10,492 15,015 20,781 26,439 32,659
Total Shareholders’ Funds 4,749 5,314 5,914 11,310 15,844 21,616 27,273 33,493
Long-term Debt 0 213 157 59 18 45 66 84
Short-term Debt 0 0 0 0 0 0 0 0
Total Debt 0 213 157 59 18 45 66 84
Other Financial Liabilities & Provisions 52 52 67 91 121 151 189 236
Other Non-Current Liabilities
Net Deferred Tax Liability (29) (76) (49) (47) (18) (18) (18) (18)
TOTAL SOURCES OF FUNDS 4,772 5,504 6,089 11,413 15,964 21,794 27,510 33,795
APPLICATION OF FUNDS
PPE (inc. IP and intangible assets) 1,158 1,137 1,108 1,095 1,621 2,202 2,631 3,070
Right of use assets 0 208 153 55 17 47 73 96
Other Non-Current Assets 289 663 2,673 14,287 1,947 2,142 2,528 2,983
Total Non-current Assets 1,447 2,008 3,935 15,438 3,586 4,392 5,232 6,148
Lien FDs (ST + LT) 8,218 5,390 8,003 12,897 44,529 54,972 60,469 66,516
Investments 56 149 353 55 187 205 226 248
Debtors 1,585 2,146 390 2,277 5,653 3,749 5,261 5,761
Cash & Equivalents 1,207 4,470 6,132 5,878 4,221 1,330 15,555 19,761
Loans & Advances 11,088 7,775 2,957 11,398 13,790 10,052 11,057 12,163
Other Current Assets 22 69 82 149 216 59 74 88
Total Current Assets 22,175 19,999 17,918 32,654 68,595 70,367 92,642 104,537
Creditors 6,146 6,378 9,395 22,764 40,668 40,715 49,323 54,009
Other Current Liabilities 12,705 10,125 6,368 13,914 15,549 12,249 21,040 22,882
Total Current Liabilities 18,851 16,503 15,763 36,679 56,217 52,965 70,363 76,891
Net Current Assets 3,324 3,496 2,155 (4,025) 12,379 17,402 22,279 27,646
TOTAL APPLICATION OF FUNDS 4,772 5,504 6,089 11,413 15,964 21,794 27,510 33,795
Source: Company, HSIE Research

Page | 6
Angel One: Company Update

Consolidated Cash Flow

(Rs mn) FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Reported PBT 1,582 1,282 1,187 4,240 8,367 11,831 12,606 13,858
Non-operating & EO Items (1) 112 298 117 (23) (63) 0 0
Interest Expenses 908 625 436 355 668 687 6 8
Depreciation 145 200 221 189 189 305 351 415
Working Capital Change (1,673) 2,619 818 (6,431) (503) (7,087) 9,022 (1,548)
Tax Paid (538) (495) (293) (972) (2,215) (2,889) (3,177) (3,492)
OPERATING CASH FLOW ( a ) 424 4,344 2,669 (2,503) 6,483 2,784 18,808 9,242
Net Capex (69) (115) (125) (140) (691) (1,005) (805) (877)
Free Cash Flow (FCF) 354 4,229 2,544 (2,643) 5,792 1,779 18,003 8,364
Investments 449 (83) (179) 386 166 (848) (21) (23)
Non-operating Income 92 5 22 2 1 1 0 0
INVESTING CASH FLOW ( b ) 472 (194) (281) 248 (524) (1,851) (826) (900)
Debt Issuance/(Repaid) 0 (51) (55) (80) (34) (22) 21 18
Interest Expenses (908) (625) (436) (347) (665) (685) (6) (8)
FCFE (554) 3,552 2,053 (3,070) 5,094 1,072 18,018 8,374
(Buyback)/Proceeds From Issue of Share Capital 11 0 0 2,854 229 114 0 0
Dividend paid (235) (234) (234) (427) (2,089) (3,756) (3,772) (4,146)
FINANCING CASH FLOW ( c ) (1,132) (911) (725) 2,001 (2,559) (4,348) (3,757) (4,137)
NET CASH FLOW (a+b+c) (237) 3,239 1,663 (255) 3,401 (3,416) 14,225 4,205
Opening Cash & Equivalents 1,443 1,230 4,470 6,132 820 4,221 1,330 15,555
Closing Cash & Equivalents 1,207 4,470 6,132 5,878 4,221 805 15,555 19,761
Source: Company, HSIE Research
Key ratios
FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
PROFITABILITY (%)
EBITDA Margin 39.0 31.4 29.7 49.4 50.8 53.1 51.5 52.1
EBIT Margin 35.7 27.4 25.3 47.3 49.7 51.8 50.1 50.6
APAT Margin 24.2 17.6 18.2 34.2 37.1 38.7 37.5 37.8
RoE 24.9 16.6 15.5 35.7 46.0 47.2 38.6 34.1
Core RoCE
EFFICIENCY
Tax Rate (%) 32.1 34.9 26.9 27.5 25.3 25.3 25.2 25.2
Asset Turnover (x) 0.9 0.8 0.5 0.7 0.9 0.8 0.8 0.8
Inventory (days)
Debtors (days) 151 171 30 121 160 69 80 80
Other Current Assets (days) 1695 1372 1344 1235 1365 1064 1268 1315
Payables (days) 506 490 720 925 882 650 716 719
Other Current Liab & Prov (days) 1046 778 488 566 337 196 305 305
Working Capital (days) 295 274 165 -135 306 287 327 371
Debt/EBITDA (x) 0.0 0.1 0.1 0.0 0.0 0.0 0.0 0.0
Net D/E -0.3 -0.8 -1.0 -0.5 -0.3 -0.1 -0.6 -0.6
PER SHARE DATA
AEPS (Rs/sh) 14.9 11.6 12.1 37.6 75.4 105.9 113.0 124.3
DPS (Rs/sh) 3.3 3.3 3.3 5.2 25.2 45.0 45.2 49.7
BV (Rs/sh) 66.0 73.8 81.5 137.2 189.8 257.2 324.6 398.6
VALUATION
P/E 133.5 172.0 165.3 46.7 22.9 16.2 15.2 13.8
P/BV 25.9 23.1 21.0 12.4 9.0 6.6 5.3 4.3
EV/EBITDA 82.3 93.4 97.2 31.1 16.3 11.7 9.9 8.7
Source: Company, HSIE Research

Page | 7
Angel One: Company Update

1 Yr Price History

Angel One

2000
1800
1600
1400
1200
1000
800
600
400
200
0
Oct-22
Jul-22

Jul-23
Jan-23

May-23
Feb-23

Mar-23

Jun-23
Aug-22

Apr-23
Sep-22

Nov-22

Dec-22

Rating Criteria
BUY: >+15% return potential
ADD: +5% to +15% return potential
REDUCE: -10% to +5% return potential
SELL: > 10% Downside return potential

Page | 8
Angel One: Company Update
Disclosure:
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does have/does not have any material conflict of interest.
Any Holding: NO
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organizations described in this report. As regards the associates of HSL please refer the website.
HSL or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the
subject company for any other assignment in the past twelve months.
HSL or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months
from t date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant
banking, brokerage services or other advisory service in a merger or specific transaction in the normal course of business.
HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with
preparation of the research report. Accordingly, neither HSL nor Research Analysts have any material conflict of interest at the time of publication of
this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service
transactions. HSL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or
employee of the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the
Research Report.
HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg
(East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066
Compliance Officer: Murli V Karkera Email: complianceofficer@hdfcsec.com Phone: (022) 3045 3600
HDFC Securities Limited, SEBI Reg. No.: NSE, BSE, MSEI, MCX: INZ000186937; AMFI Reg. No. ARN: 13549; PFRDA Reg. No. POP: 11092018; IRDA
Corporate Agent License No.: CA0062; SEBI Research Analyst Reg. No.: INH000002475; SEBI Investment Adviser Reg. No.: INA000011538; CIN -
U67120MH2000PLC152193
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Mutual Funds Investments are subject to market risk. Please read the offer and scheme related documents carefully before
investing.
Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary
or provide any assurance of returns to investors.

HDFC securities
Institutional Equities
Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park,
Senapati Bapat Marg, Lower Parel, Mumbai - 400 013
Board: +91-22-6171-7330 www.hdfcsec.com

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