India’s leading ad-tech firm turned multibagger during a pandemic season; is it a risky bet now?

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Ad-tech company Affle India has been buzzing on Dalal Street due to its superlative performance since listing in August 2019. The scrip has jumped nearly 475% to Rs 4,283 on February 8 from the issue price of Rs 745.

An investment of Rs 14,900 in one lot of Affle India would have now fetched over Rs 85,660 due to the ongoing rally in the domestic equity market. Last year, the scrip climbed around 140% despite uncertainties due to Covid-19 pandemic. On the other hand, the benchmark BSE Sensex gained 16% during the year.

Market experts believe that the momentum will sustain given the presence of the company in high-growth verticals, wallet share gains and focus on new markets.

While maintaining ‘Buy’ call on Affle India with a price target of Rs 5,000, brokerage Sharekhan said, “Affle is well placed to derive benefits going ahead. We expect earnings to post a 28% CAGR over FY2021-FY2023E.”

Of late, the digital advertising firm on February 6 posted a 42.9% growth in net profit at Rs 30.6 crore for the quarter ended December 31. It had registered a net profit of Rs 21.4 crore in the year-ago period. Its revenue was at Rs 150.5 crore in the reported quarter, up 59.3% from Rs 94.5 crore in the December 2019 quarter.

ICICI Securities is also bullish on Affle India with a 12-month price target of Rs 5,100, indicating an upside of 19% from the current market price.

“The company has seen a robust improvement in CPCU (Cost per converted user) revenues (33% YoY in April-Dec), which, we believe is mainly due to improvement in advertising budget and shift of spends towards mobile advertising. In addition, we expect the robust growth in Q4FY21E revenues to continue with organic growth up 30% YoY, rest inorganic. Considering this organic revenue trajectory and acquisition we expect the company to register 49.8% YoY growth in revenues in FY21E,” the brokerage said.

According to Affle India, its CPCU business witnessed strong momentum delivering 3.1 crore of converted users in Q3FY21, an increase of 46.1% YoY. The top 10 industry verticals for the company continued to be Covid-19 resilient, helping it register a robust growth in this quarter both on a YoY and QoQ basis.

Dolat Capital is also positive on the company with a price target of Rs 5,000.

“We believe Affle India offers a unique interplay of Digital+Mobility+Analytics theme that can offer multi-year-high-growth opportunity. With strong performance in Q3, we have upgraded our top line CAGR over FY20-25E by 300bps to 33% and assign Accumulate rating with a price target of Rs 5,000.”