BUY

Results Update Affle Ltd. Target Price

16th May 2023 IT Services 1250

Results below expectation due to seasonally weak quarter; Outlook

(CMP as of 15 May 2023 )
remains healthy
CMP (Rs) 921
Est. Vs. Actual for Q3FY23: Revenue – MISS ; EBITDA Margin – MISS; PAT – Upside /Downside (%) 36%
MISS High/Low (Rs) 1,369/871
Changes in Estimates post Q3FY23 Market cap (Cr) 12,278

FY24E/FY25E: Revenue: 0.5%/1%; EBITDA: 0.5%/1%; PAT: 1%/1% Avg. daily vol. (6m)Shrs. 5,94,320
No. of shares (Cr) 14.6
Recommendation Rationale
 Device addition remained tepid during the quarter but strong additions in converted Shareholding (%)
users Sep-22 Dec-22 Mar-23
 The international business vertical has declined during the quarter but is likely to Promoter 59.9 59.9 59.9
regain momentum. FIIs 14.2 12.6 11.4
 The management is confident of gaining medium-term demand momentum on the MFs / UTI 6.2 7.5 8.2
backdrop of the deals it has won in the previous quarters. It also expects Banks / FIs 0.0 0.0 0.0
improvement on the margin front moving forward. Others 19.7 20.0 20.5

Sector Outlook: Cautiously positive

Financial & Valuations
Company Outlook & Guidance: The management has indicated robust revenue Y/E Mar (Rs Cr) FY23E FY24E FY25E
growth guidance for FY24 backed by strong deal wins. Margins are likely to Net Sales 1,434 1,986 2,463
expand in the near term. EBITDA 285 497 616
Current Valuation: 47x FY25E P/E; Earlier Valuation: 51x FY25E Net Profit 245 559 706
EPS (Rs) 9.2 21.0 26.6
Current TP: 1,250/share (Earlier TP: Rs 1350/share)
PER (x) 117.3 51.4 40.7
Recommendation: Given the company’s strong recovery potential backed by strong P/BV (x) 50 28 21
deal wins and improved client engagement, we maintain our BUY recommendation on EV/EBITDA (x) 42 27 16
the stock. ROE (%) 39% 58% 49%
Financial Performance
Change in Estimates (%)
In Q4FY23, Affle Ltd. reported tepid growth with revenue at Rs 356 Cr, registering a de-
Y/E Mar FY24E FY25E
growth of 5.4% QoQ. Consolidated EBITDA for the quarter de-grew by 10.8% QoQ to Rs Sales 1% 1%
712 Cr, led by the lower international business. The company’s EBITDA margins also EBITDA 1% 1%
declined by 140 bps QoQ to 20% in Q4FY23. It reported a net income of Rs 62 Cr, down PAT 1% 1%
9.5% QoQ.
ESG disclosure Score**
Outlook
Environmental Disclosure 44
From a long-term perspective, we believe Affle has strong device additions and better Social Disclosure Score 60
client additions. We believe the company has better penetration in the international Governance Disclosure 59
Score
business and strong revenue growth potential going ahead. Total ESG Disclosure Score 51
Source: Bloomberg, Scale: 0.1-100
Valuation & Recommendation **Note: This score measures the amount of ESG data a company reports
publicly and does not measure the company's performance on any data
point. All scores are based on 2020 disclosures
We recommend a BUY rating on the stock and assign a 47x P/E multiple to its FY25E
earnings of Rs 26.6/share to arrive at a TP of Rs 1,250/share, implying an upside of 36%
Relative performance
from the CMP.
525
Key Financials (Consolidated) 425

325
(Rs Cr) Q4FY23 QoQ (%) YoY (%) Axis Est. Variance
225
Net Sales 356 -5% 5% 372 -4% 125

EBITDA 72 -11% 6% 77 -7% 25

Jan-20 Jul-20 Feb-21 Sep-21 Mar-22 Oct-22 May-23

EBITDA Margin 20% 110 bps 150 bps 21% -4% Affle India BSE Sensex

Net Profit 62 -10% 11 58 8% Source: Capitaline, Axis Securities

EPS (Rs) 5.19 18% 11% 4.6 13%

Source: Company, Axis Research

Omkar Tanksale
Research Analyst
Email:omkar.tanksale@axissecurities.in