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Analysts on Dalal Street retained their bullish view on India’s ad-tech leader Affle India on the back of rising digital adoption with mobile being the preferred channel. Brokerage firm Prabhudas Lilladher has set a target price of Rs 7,023, indicating an upside of over 20% from the current market price of Rs 5,800. On the other hand, Spark Capital has fixed a target price of Rs 6,250. Shares of the company have already delivered multibagger returns to investors since listing in August 2019. The scrip has gained over 110% in the past one year and 678% against the issue price of Rs 745.

What’s next?

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. The 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 incredible consolidation opportunities,” Affle Chairman, MD and CEO Anuj Khanna Sohum said.

Brokerage views

Of late, Prabhudas Lilladher initiated the cover on Affle India with a ‘Buy’ rating. It added that the company operates in emerging markets that have high growth in digital advertising (30% CAGR over FY21-25E) and are underpenetrated at around 30% digital ad spend vs around 50% globally.

“It has differentiated end-to-end digital advertising capability with a high return on the investment-driven pricing model, ability to expand addressable market share by profitably scaling up acquisitions with unique tech capabilities and it maintained above-average margins despite operating in emerging markets with low unit economics. We expect revenue/EPS CAGR of 54%/30% over FY21-24E and arrive at DCF based target price of Rs 7,023,” Prabhudas Lilladher said.

However, the company has recently approved a stock split of the company’s one equity share of the face value of Rs 10 into five equity shares of the face value of Rs 2 each. The record date for the stock split is October 8, 2021.

On the other hand, Spark Capital said that Affle builds and operates digital advertisement platforms to deliver managed services and self-service suites to advertisers/ad agencies. “Affle ticks all the boxes including large runway for growth with an effective TAM of $ 20bn and is growing at around 25%. About 85% of Affle’s business is from a performance-based revenue model that has twin benefits – operational discipline and customer ring-fencing, track record of operating multiple platforms and integrating inorganic acquisitions to drive synergy, the beneficiary of current tailwinds that are shifting digital budget from iOS to Android, deep relationships directly with brands with just around 30% of business coming from ad agencies and steady reduction in top-10 customer concentration risk (65% in FY19 to 43% in FY21),” the brokerage said.