Financial firm JM Financial's bullish stance on Angel One: Key motives behind the 'Buy' recommendation
Angel One, one of the largest retail brokers in India with over 32 million clients, has made significant strides in diversifying its business within the financial services sector. The company transitioned from a regular offline broker to an online discount broker in FY20, marking the beginning of its expansion.
In FY24, Angel One entered adjacent business lines, venturing into wealth management, asset management, loan origination, and life insurance. The company has also started its asset management company and entered into a joint venture to develop and distribute insurance products.
The regulatory landscape around the derivatives business has evolved for Angel One, but the company has navigated these changes effectively, maintaining its FY25 net profit at FY24 levels. This resilience is a testament to Angel One's adaptability in the face of regulatory changes.
JM Financial, a leading brokerage firm, believes that the main reason for initiating coverage on Angel One is the phenomenal growth in revenue, net profit, and client base. Since the transition, Angel One has seen strong growth across parameters, with the client base growing at a 68% CAGR, net revenue at an 80% CAGR, and PAT at a 90% CAGR over FY20-FY24.
More than 9 million of Angel One's clients are active on the National Stock Exchange (NSE). However, JM Financial notes that new client acquisition and revenue have been volatile, with old clients providing steady revenue. In FY25, 39% of net revenue came from clients acquired over FY24-FY25.
JM Financial expects revenue to become more recurring as the company incrementally acquires its existing client base. The firm also anticipates a potential capex slowdown and fiscal deficit challenge due to GST 2.0.
A gradual transition of customers from the broking business to the wealth management business is expected to result in the unlocking of growing and recurring revenue streams. The industry has become fairer with up-streaming of client funds, true-to-label charges, and a limited number of expiry days, despite regulatory concerns around retail losses in the derivatives segment.
Despite these challenges, the target price on the stock for the next twelve months is Rs 2,700. JM Financial has initiated coverage on Angel One with a 'Buy' rating, reflecting their optimistic outlook on the company's growth and potential.
However, it's worth noting that there is no information available about the founding date of the asset management company of Angel One in the provided search results. As Angel One continues to expand and grow, more details about its ventures will undoubtedly emerge, providing a clearer picture of its future in the financial services sector.
