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Analysts on Dalal Street retained their bullish view on Affle India after the company last week posted a nearly three-fold jump in consolidated profit at Rs 58.7 crore for the quarter ended March 31, 2021. The company had posted a net profit of Rs 20 crore in the same quarter a year ago.

Of late, shares of the company have already rallied 446% to Rs 5305.80 on May 31, 2021 from Rs 971 on April 1, 2020. That means, a Rs 20,000 investment made in the stock last year would have become Rs 1.09 lakh at present.

Road ahead

Going with market watchers, Affle has been a key beneficiary of a shift of advertising budget to the digital medium. This, coupled with increasing smartphone penetration and rising online shoppers from (120 million to 450 million CAGR of 24% in the next five years) is expected to drive 35% CAGR in the Indian region (50% of revenues).

For the fiscal year 2020-21, Affle posted a profit of Rs 129.36 crore compared to Rs 70.9 crore in the previous year. Topline of the company increased to Rs 558.31 crore in 2020-21 compared to Rs 339.87 crore in the previous year.

“Our outlook for the financial year 2022 is optimistic and we are strongly positioned to leverage the new market dynamics and invest in credible consolidation opportunities,” Affle Chairman, MD and CEO Anuj Khanna Sohum said.

Brokers take
ICICI Securities has a ‘Buy’ call on Affle with a price target of Rs 6,225. As the majority of regions outside India where Affle has a presence are mostly emerging markets, the brokerage believes there is tremendous growth potential outside India also.

In addition, Affle sees healthy traction in 10 verticals including e-commerce, entertainment, ed-tech, foodtech, fintech, FMCG, gaming, grocery, government, healthcare, which is expected to drive revenues, going forward.

“We expect this improving revenue growth to continue mainly led by shift of advertising budget towards digital medium, higher online shopping and improved penetration in tier-2, tier-3 cities of India. This, coupled with geographic expansion and significant shift among consumers to adopt digital technology globally will drive long term revenues,” ICICI Securities said.

Another brokerage Sharekhan is also positive on Affle with a price target of Rs 6,580. Given its focus on high-growth verticals, expansion of geographies, favourable industry tailwinds (rising number of shoppers, accelerated adoption of mobiles and a higher budget towards mobile advertising) and M&A, the management remains confident of delivering an over 25-30% annual revenue growth over the next five years despite its growing base.

At present, the stock is trading at 72x its FY2023E earnings. Sharekhan believes that the current valuations are justified given its strong revenue growth potential on the back of strong industry tailwinds and presence in high-growth markets.