Elara Securities Recommends ACCUMULATE for Affle India with a Target Price of ₹1275

Elara Securities Recommends ACCUMULATE for Affle India with a Target Price of ₹1275

VoM News Desk | February 6, 2024 | 12:44 PM IST | Breaking News | Follow on Google News

Elara Securities Recommends ACCUMULATE for Affle India with a Target Price of ₹1275

Elara Securities Recommends ACCUMULATE for Affle India with a Target Price of ₹1275

Rating: ACCUMULATE

Target Price: ₹1275

Upside: 7%

CMP: ₹1195 (as of February 5, 2024)

Key Points:

1. Premium Valuations for Ordinary Growth: Affle India (AFFLE IN) is observed to have premium valuations for what is considered ordinary growth.
2. Muted Organic Growth: The report mentions muted organic growth for Affle, with international markets showing a YoY growth of 20%, primarily driven by stability in developed markets and strong growth in other emerging nations. The India market grew by 1.9% YoY, but excluding the negative impact from the Gaming vertical, it could have been 20% YoY in Q3.
3. Profitability Woes: Affle faces profitability challenges, with EBITDA margin declining 80bps QoQ. This decline is attributed to higher data costs and employee expenses. The report expresses concerns about potential escalation in third-party data costs due to global and Indian data privacy measures.
4. Valuation and Target Price: The report downgrades Affle India to ‘Accumulate’ from ‘Buy’ with a target price of ₹1275, reduced from ₹1350. The valuation at 35.2x FY26E P/E is considered to largely factor in positive impacts.
5. Revenue and Earnings Outlook: Affle is projected to report revenue and earnings CAGR of 22.5% and 24.8%, respectively, in FY23-26E. The report suggests that the valuation considers a positive impact.
6. Revised Earnings Estimates: FY25E/FY26E earnings estimates are revised lower by 3.8%/5.1% on lower revenue growth. The lower growth is offset by higher other income in FY25E/26E due to a preferential issue raising INR 7.5 billion.

In summary, the report acknowledges the growth potential in non-India emerging markets but expresses caution regarding India’s organic growth and concerns over profitability challenges. The recommendation is to ‘Accumulate’ with an adjusted target price reflecting the revised outlook.

VoM News Desk

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