Home >Markets >Mark To Market >Angel Broking stock jumps to a new high after Q1; valuations pricey

Shares of Angel Broking Ltd gained more than 5% on Monday, and touched a new high on the National Stock Exchange. The shares have now appreciated as much as 27% since it announced its June quarter (Q1FY22) results after market hours on Thursday.

Analysts from ICICI Securities Ltd have upgraded their FY22/FY23 earnings estimate by 20%/17% to factor in strong business momentum. “Our earnings expectations factor any possible deceleration in trading volumes in H2FY22. Sustained growth in earnings will lead to operating leverage which should increase Ebitda margin from 48% in FY21 to 50.4% in FY22 and 51.3% in FY23," said the broker in a report on 16 July.

Ebitda is earnings before interest, tax, depreciation and amortization, a key measure of profitability for companies.

For the June quarter, Ebitda stood at 49%, similar to the March quarter. Further, absolute Ebitda increased by 13.6% vis-à-vis the March quarter to 166 crore. Profit after tax though increased at a slightly faster pace of 19% to 121 crore on a sequential basis. The company’s overall gross revenues increased by 13% against the March quarter. Gross client addition during the June quarter was strong at 1.20 million vis-à-vis 0.96 million clients in the March quarter.

Meanwhile, Angel Broking’s board has approved an interim dividend of 5.15 per share.

ICICI Securities has increased the multiple from 18 times to 22 times estimated earnings for financial year 2023. Their rationale is threefold. Firstly, strong exchange turnover momentum (annualised Q1FY22 run-rate of NSE would imply FY22 growth in cash/derivative volumes of 16/70% in FY22), strong client acquisition momentum (average Q1FY22 active client is 19% higher than FY21) and heightened capital markets momentum (multiple IPOs lined up).

“Second, significantly higher multiples of capital market players like CAMS, CDSL, AMCs. While retail trading volumes could be cyclical which may make earnings volatile for ABL, the same hypothesis is also true for exchanges and depositories. Thirdly, available optionalities in terms of distribution/AMC business under proposed umbrella brand ‘Ängel One’," point out ICICI Securities’ analysts.

While these factors augur well, the sharp appreciation in the Angel Broking stock suggests investors are capturing a good portion of the optimism into the price.

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