JM Financial has initiated coverage on Angel One with a ‘Buy’ rating. The target price on the stock for the next twelve months is Rs 2,700, implying up to 17.6% upside. The main reason that they have initiated coverage on the discount broker firm was the phenomenal growth in revenue, net profit, and client base.
JM Financial on Angel One: Growing client list
The company is amongst the largest retail brokers in India, with over 32 million clients, of which more than 9 million are NSE active. Angel One was a regular offline broker in 1996, but the company soon pivoted to online discount broking in FY20. Since then, it saw strong growth across parameters with client base growing at 68% CAGR, net revenue at 80% CAGR, and PAT at 90% CAGR over FY20-FY24.
JM Financial on Angel One: Forayed into new businesses
Starting in FY24, Angel One has entered adjacent business lines within financial services, including wealth management, asset management, loan origination and life insurance, even as regulations around the derivatives business have evolved.
“Despite regulatory changes with concerns around retail losses in the derivatives segment, the industry has become fairer with up-streaming of client funds, true-to-label charges, and a limited number of expiry days. Angel One navigated these to maintain FY25 net profit at FY24 levels, even as it invested in adjacent business lines,” said JM Financial.
Angel One has strategically started its asset management company and wealth management business, and entered into a JV to develop and distribute insurance products. A gradual transition of customers from the broking business to the wealth management business is expected to result in unlocking of growing and recurring revenue streams.
JM Financial on Angel One: New client acquisition and revenue is volatile
JM Financial stated that while new client acquisition and revenue have been volatile, old clients have provided steady revenue. In FY25, 39% of net revenue came from clients acquired over FY24-FY25. As the company is incrementally acquring its existing client base, JM Financial expects revenue to be more recurring, providing a steady runway while it resumes its hunt to return to previous levels as the cost of acquisition normalises.
“As the company has been cautious on client acquisition in FY25 and H1 FY26 and is investing in adjacent businesses, we expect net profit to decline by 15% in FY26 over FY25, before it recovers from FY27 onwards,” stated JM Financial.