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MOSL: ANGEL ONE (Buy) - INITIATING COVERAGE: Leaner, stronger, faster – A transformed broker!

(ANGELBRK IN, Mkt Cap USD1.4b, CMP INR1232, TP INR1750, 42% Upside, Buy)

 

 

• Angel One has emerged to be India's third-largest broker with 6.5m total clients and 2.5m active clients on the NSE. It has a market share of 9.3% in active clients on the NSE, which has increased from 4.8% in 1QFY20.
• Indian brokerage industry is at an inflection point wherein only 5.1% of the Indian population have a demat account v/s 13.7% in China and 32% in the US. This is in spite of 1) number of demat accounts in India surging from 36m at the end of FY19 to 67m in Aug 2021, 2) active user accounts on NSE has jumped from 8.8m to 25.5m during the same period, and 3) retail ADTO skyrocketing from INR6t in Apr 2019 to INR27t in Sep 2021.
• Angel, with its transformational journey from being a traditional broker to adopting a completely digital model, offering a seamless online trading platform through its mobile app, website and call centre support is well placed to leverage on this growth opportunity and further strengthen its position. This transformation has been a key reason for its success so far wherein the market share in Equity ADTO has surged from 3.7% to 21.2% in a space of 10 quarters.
• Core to Angel's growth strategy has been its customer acquisition initiatives wherein it has targeted the Millennial and GenZ population in the tier 2 and tier 3 towns. As a result, the share of tier 2 and tier 3 towns in its gross customer additions has surged from 85% in 1QFY20 to 94% in 2QFY22. Also, the median age of these customers has declined from 34 years in 1QFY20 to 29 years in 2QFY22.
• In spite of the tough competition, Angel's market share in F&O has jumped up from 3.3% in 1QFY20 to 21.1% in 2QFY22. While the cash segment witnessed some pressure post the margin norms implementation (market share fell from 18.2% in 3QFY21 to 13.6% in 2QFY22), the F&O segment which contributes to 98% of the total retail industry ADTO has witnessed a sustained increase.

In April 2021, Angel appointed Mr. Narayan Gangadhar as the CEO who has over two decades of experience with companies such as Amazon, Google, Microsoft and Uber. In addition to this, there were 11 such mid-management level hires in 2QFY22. The overall share of the digital employee base to total employee base has increased from 10% in 1QFY20 to 18% in 2QFY22. The company will continue to invest in acquiring more of such talent to enhance its technological and digital capabilities.