Affle India is a pureplay ad tech company that helps enterprises drive user acquisitions and improve consumer engagement through mobile advertising. For every $1 of advertiser’s digital spend, nearly 50 cents reach the publisher, with the ad tech ecosystem retaining the remaining 50 cents. And within the ad tech ecosystem, integrated players such as Affle India retain around two-thirds of the 50 cents, analysts said.
Prabhudas Lilladher, which initiated coverage on this stock on Friday, sees its price at Rs 7,023. Spark Capital set a target of Rs 6,250 when it initiate coverage on this stock on September 21. Earlier this month, BOB Capital Markets suggested a 12-month target of Rs 6,200 for this stock. The three price targets suggest 16-32 per cent potential upside from current levels.
The stock on Friday closed at Rs 5,322 on BSE. Despite the recent fall, it is still up 614 per cent over its August 2019 IPO price of Rs 745. The company last week approved a stock split in the 1:5 ratio.
Technical View
The stock had fallen about 30 per cent from its March high of Rs 6,287 to a low of Rs 4,000 in August. Since then, the scrip has been on the recovery mode.
“The stock has broken out of a downward sloping trend line with good volumes after retesting the cluster of previous troughs and peaks. A sustained move beyond the Rs 5,120 level can take it back to Rs 5,700-6,050 levels,” said Aditya Agarwala, Senior Technical Analyst at YES Securities.
Independent analyst Manish Shah said the index had formed a bullish Morning Star pattern on the monthly time frame chart in July, which was a classic candlestick reversal pattern. He said the price action is showing bullish action on all timeframes and a rally towards the Rs 7,000-7,500 range over the next couple of months is possible. He believes the Rs 5,350-4,800 range can offer a good buying opportunity.
“The decline from the high at Rs 6,285 has reversed. This is a bullish reversal pattern and denotes a massive change in sentiment. On the weekly timeframe chart, we have seen a ‘buy’ signal on the MACD. In terms of Elliott Wave count, we are probably completing Wave IV of the decline and the current price action shows the rise from the low of Rs 4,000 has completed the decline from the high of Rs 6,285. The newly bounce could challenge the high and trade beyond it as the price makes a new Wave V high,” Shah said.
Fundamental view
Affle operates in the emerging markets (EMs) that are projected to see 30 per cent growth in digital advertising over FY21-25. EMs are underpenetrated and account for only 30 per cent digital ad spend compared with 50 per cent globally.
“Affle has differentiated end-to-end digital advertising capability with a high ROI-driven pricing model, and the ability to expand the addressable market share by profitably scaling up acquisitions with unique tech capabilities. It maintained above-average margins despite operating in emerging markets with low unit economics,” Prabhudas Lilladher said.
This brokerage is expecting a 54 per cent growth in annual revenues for Affle India over FY21-24 and projects an EPS growth of about 30 per cent over this period. The brokerage values the stock at 92 times FY23 EPS of Rs 76 and 61 times FY24 EPS of Rs 116.
Spark Capital said Affle India ticks all the right boxes. “It has a large runway for growth with an effective total addressable market of $20 billion. About 85 per cent of Affle’s business is from a performance-based revenue model that has twin benefits: operational discipline and customer ring-fencing. Affle also has a track record of operating multiple platforms and integrating inorganic acquisitions to drive synergy,” it said.
Besides, the company is a beneficiary of current tailwinds that are shifting digital budget from iOS to Android, it said.
“There are no capital allocation blunders so far. Affle has deep relationships directly with brands with just 30 per cent of business coming from ad agencies. There is a steady drop in Top-10 customers, reducing the concentration risk. While expectations that Google would self-regulate itself with pro-privacy measures like that of Apple are valid, our analysis & interaction with industry participants reveal that plain extrapolation would be stretching too far,” Spark said.
BoB Capital said while there are concerns over privacy issues persisting with Apple’s iOS blocking cookies, Affle has clarified that its business will remain unaffected as its delivery is independent of web browsers.
“Also, Google’s decision to push back cookie-blocking to 2023 provides relief to the company. However, to derisk its business from user privacy concerns, it is focusing on strengthening partnerships with the OEM/carrier ecosystems to get first-party data,” the brokerage said. It valued the stock at a one-year forward P/E of 61.8 times.
