Following the release of the company’s financial results, domestic brokerage firms revised down their earnings estimates for Angel One due to escalating operating expenses.
The company witnessed a notable increase in customer acquisition costs and an increase in employee expenses, contributing to a 21% year-over-year and 13% quarter-over-quarter decline in EBITDA. The increase in employee costs can be attributed to the increased headcount, particularly in the business asset management, data and analytics, and technology operations.
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The company achieved the highest customer addition, welcoming 2.5 million customers in Q3. This success, however, led to increased one-time customer acquisition and input costs. In addition, increased expenditure on technology infrastructure, DEMAT charges in line with business growth, and additional quarterly expenditure of ₹25 million on CSR contributed to the overall increase, said domestic brokerage firm Keynote Capitals.
Finance costs also jumped during the quarter due to increased average loans during the period, aligning with the expansion of the customer finance book and elevated margin requirements resulting from business growth. Furthermore, the company expects an increase of ₹400 million in financial costs due to the impact of high loans.
Following the company’s performance in Q3, Keynote Capitals revised its ratings and lowered its rating from “buy” to “sell” with a target price of ₹2,592 each.
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“AOL showed strong performance in customer additions, while growth in some businesses on a QoQ basis moderated. Further, we expect cost to remain elevated as the company invests in customer acquisition and employee additions,” the brokerage said.
Another brokerage firm, Motilal Oswal also adjusted its FY24, FY25 and FY26 revenue estimates down by 6.8%, 5.2% and 3%. This adjustment accounts for increased operating costs, specifically personnel and administrative expenses, driven by the continued momentum in customer acquisition and investments in new business ventures.
However, the brokerage retained its “buy” call on the stock with a target price of ₹4,000 each.
HDFC Securities, on the other hand, said the company remains one of the best core portfolios on the secular growth track record in Indian capital markets. However, it believes that the Unit economy is plateauing, given early signs of diminishing marginal utility (newly acquired customers). It maintains its ‘Add’ rating on the stock with a revised target price of ₹3,510 each.
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On the technical front, Riyank Arora, Technical Analyst at Mehta Equities, said, “The stock has moved lower and tested its crucial support zone from 3075 to 3125. The overall structure continues to look on the positive side, and it seems that the stock should find support here. Upside potential looks likely at the 3,300 and 3,350 marks, with a stop loss placed slightly below the 3,000 mark.
Despite the recent steep decline in the stock’s value over the past six sessions (including today’s trade), it still maintains an impressive gain of 138% over the last one-year period and an extraordinary gain of 900% over the past five years.
Disclaimer: The opinions and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 23 Jan 2024, 13:40 IST
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