Angel One Ltd is a well-rounded financial services provider with a robust business model encompassing stock, commodity, and currency broking, among other services. The company boasts a healthy financial profile with a market cap of ₹18,794 Cr, and a commendable sales growth of 40.6% over five years. Notably, its operating profit margin (OPM) stands at 37.8%. Angel One maintains a low debt-to-equity ratio of 0.84, alongside a stable promoter holding of 35.6% with no pledged shares. The stock is currently priced at ₹2,086, closely matching its intrinsic value of ₹2,084.83, suggesting it is fairly valued. Given these metrics, Angel One presents a potential buy opportunity, especially for investors looking for steady dividend yields and growth in the financial services sector.
Disclaimer:
Information provided for Educational Purposes Only: This information is provided for educational and informational purposes only and should not be construed as financial advice.
Not a Substitute for Professional Advice: Always consult with a qualified financial advisor or professional investment consultant before making any investment decisions. They can provide personalized guidance based on your individual financial situation, risk tolerance, and investment goals.
No Liability for Losses: We are not liable for any losses incurred by individuals who make investment decisions based on this information. Investing involves inherent risks, and you should be aware that past performance is not indicative of future results.
Acknowledgement and Acceptance: By accessing and using this website, you acknowledge and accept this disclaimer.
TLDR:
- Current Stock Price: ₹2,086
- Intrinsic Value: ₹2,084.83
- Market Cap: ₹18,794 Cr
- Stock P/E: 15.7, close to the industry P/E of 16.0
- Book Value: ₹362
- Dividend Yield: 1.92%
- Operating Profit Margin (OPM): 37.8%
- Debt to Equity Ratio: 0.84
- Promoter Holding: 35.6%, with a decrease in the last quarter
- Pledged Percentage: 0.00%
- Sales Growth over 5 Years: 40.6%
- Profit Growth: 69.8% CAGR over the last 5 years
Recommendations:
- Buy Recommendation: Angel One Ltd could be considered for buying as it has a low debt to equity ratio (0.84), stable promoter holding, no pledged shares, and an improving OPM. Its P/E is slightly lower than the industry average, suggesting it might be undervalued.
- Sell/No Buy Recommendation: There should be caution due to the recent decrease in promoter holding which could signal a lack of confidence by insiders.
- Caution Recommendation: Although the company’s financial health appears stable, the decrease in promoter holding needs monitoring as it could be a red flag for potential issues in governance or future growth expectations.
Company Introduction and Profile:
Angel One Ltd, a prominent player in the financial services sector, operates extensively in stock, commodity, and currency broking, along with providing depository services, margin trading, and distribution of mutual funds. With a market cap of ₹18,794 Cr and a current price of ₹2,086, closely aligning with its intrinsic value of ₹2,084.83, the company demonstrates solid financial standing. Over the past five years, Angel One has achieved a remarkable sales growth of 40.6% and an impressive profit variance of 69.8%. The firm boasts a high operating profit margin (OPM) of 37.8%, a robust return on equity (ROE) of 43.3%, and maintains a low debt-to-equity ratio of 0.84, indicative of prudent financial management.
Should We Buy, Sell, or Hold This Stock and Why?
Based on the financial metrics and market performance, Angel One Ltd is a recommended buy. The company exhibits a low debt-to-equity ratio (0.84), constant or increasing promoter holding, and no pledged shares, aligning with strategic buy signals. Its operating profit margin (OPM) of 37.8% and a relatively lower P/E ratio compared to the industry suggest undervaluation, which is promising for potential growth. Despite a slight decrease in promoter holding by 2.58% last quarter, the overall financial stability and growth prospects make it an attractive investment option.
Vital Company Ratios for a Layman:
For those new to financial analysis, Angel One Ltd presents compelling ratios that underscore its fiscal health. The Return on Equity (ROE) is exceptionally high at 43.3%, indicating efficient management and profitable business operations. The Operating Profit Margin (OPM) stands at 37.8%, reflecting strong operational efficiency. Furthermore, the debt-to-equity ratio at 0.84 is relatively low, suggesting the company is not overly reliant on debt to finance its operations. These ratios, combined with a stable dividend yield of 1.92% and a close match between the current stock price and book value, make Angel One an understandable and potentially lucrative investment for lay investors.
Financial Performance:
Angel One has shown strong financial performance over the last few years. Sales have grown at a 40.6% CAGR over the past 5 years to reach Rs 4,870 crore. Profit growth has been even more impressive at a 69.8% CAGR over the same period. The latest quarter (Jun 2024) saw sales increase 74% YoY to Rs 1,405 crore.
Operating margins are healthy at 37.8%. Return ratios are very strong, with ROE at 43.3% and ROCE at 38.7% for the latest fiscal year.
The balance sheet is moderately levered, with a debt-to-equity ratio of 0.84. Cash and equivalents stand at a comfortable Rs 12,844 crore as of the latest reported quarter.
Angel One’s valuation multiples are reasonable compared to peers. Its P/E of 15.7 is in line with the industry median of 15.73. The stock currently trades close to its estimated intrinsic value.
Key Metrics & Recommendation:
- Low Debt/Equity of 0.84
- High OPM of 37.8%
- High cash equivalents of Rs 12,844 cr
- Promoter holding steady but declined 2.58% QoQ to 35.6%
- No pledged shares by promoters
- Stock trading at Rs 2,086, close to intrinsic value estimate of Rs 2,085
- Healthy dividend yield of 1.92%
Based on Angel One’s strong fundamentals, reasonable valuation, and only mildly negative factors, I would rate it as a CAUTIOUS BUY. The steep QoQ drop in promoter stake is a watch point. But the company’s robust growth, profitability and return ratios, comfortable leverage and liquidity make it an attractive long-term investment.
Is Angel One Ltd Overvalued or Undervalued?:
Angel One Ltd is priced closely to its intrinsic value, with a current market price of ₹2,086 compared to an intrinsic value of ₹2,084.83, indicating it is fairly valued. The stock’s Price-to-Earnings (P/E) ratio is 15.7, slightly below the industry average P/E of 16.0, suggesting that it is not overvalued relative to its peers. Additionally, the company’s high Operating Profit Margin (OPM) of 37.8% and low debt-to-equity ratio of 0.84 further affirm its strong financial health and efficient operation, supporting a valuation that is neither too high nor too low.
Should We Buy This Stock and Why?:
Buying Angel One Ltd could be considered a sound investment based on several key financial metrics. The stock has a low debt-to-equity ratio (0.84), consistent promoter holding (albeit a slight recent decrease), no pledged shares, and a robust ROE of 43.3%. These factors indicate strong management effectiveness and financial stability. The company’s high OPM and consistent profit growth (69.8% CAGR over the last five years) also suggest operational efficiency and potential for continued growth. With the stock nearly priced at its intrinsic value and showing promising financial health indicators, it represents a potentially prudent buy for value and growth investors.
How Is the Industry of This Company Growing?:
The industry of stock, commodity, and currency broking is witnessing growth, driven by increasing financial market penetration and investor awareness. Within this sector, Angel One Ltd demonstrates significant competitive strength. The company’s sales growth of 40.6% over five years outperforms the median industry sales growth. Additionally, its ROCE of 38.7% is considerably higher than the industry median of 20.12%, indicating superior capital efficiency. The industry itself benefits from broader economic trends such as digitalization of financial services and growing retail participation in stock markets, which are reflected in the performance and expansion strategies of firms like Angel One. Thus, the industry’s growth trajectory, supported by favourable market conditions and technological advancements, suggests a positive outlook for companies well-positioned like Angel One.
Key Risks Associated with Angel One Ltd and the Broking Industry
Business and Commercial Risks:
- Competition: Angel One operates in a highly competitive sector dominated by major players like ICICI Securities and Motilal Oswal, which consistently innovate and offer similar services. This competition pressures margins, customer acquisition, and retention.
- Regulatory Changes: The broking industry is subject to stringent regulatory requirements, which could change, impacting operations and profitability. New regulations related to transaction charges, compliance requirements, or client management could affect operational costs and business models.
- Market Volatility: As a financial services provider, Angel One’s performance is closely tied to market conditions. Prolonged market downturns or increased volatility can reduce trading volumes and affect the company’s earnings.
- Technology Risks: Dependence on technology in trading platforms poses risks related to cybersecurity breaches and technical failures, which could lead to operational disruptions and loss of client trust.
Risks to Consider Before Investing:
- Promoter Holding Fluctuations: A recent decrease in promoter holding could signal reduced confidence by major stakeholders, potentially impacting the stock’s stability.
- Debt Levels: While currently manageable, any increase in debt or adverse changes in financing conditions could affect the company’s financial health.
- Interest Rate Risk: Changes in interest rates could impact the financial products segment, affecting the profitability of loans and margins.
Potential Industry Risks:
- Economic Downturns: Economic slumps can lead to reduced investment activity, directly impacting the revenue from commissions and transaction volumes.
- Innovation and Disruption: The rise of fintech and disruptive technologies like robo-advisors could alter the traditional broking landscape, potentially eroding market share for established players unless they adapt promptly.
Management Quality Assessment
As of the latest available information, there are no criminal cases against the promoters or management of Angel One Ltd. The management is recognized for steering the company through consistent growth phases, evidenced by a significant compound annual growth rate (CAGR) in profits and sales over the past few years. However, investors should continually monitor changes in management’s stake in the company and any news related to governance practices as these could provide important context for assessing management quality.
Is it Advisable to Invest in Angel One Ltd?
Recommendation: Given the current metrics:
- Low Debt to Equity Ratio (0.84): Indicates financial stability.
- High OPM (37.8%): Suggests operational efficiency.
- Consistent Promoter Holding: Although there was a slight decrease, the substantial majority holding without any pledges reflects solid backing by the promoters.
- Growing Sales and Profit: Strong historical performance suggests good management execution.
Investing in Angel One appears promising, especially if the investor is looking for exposure within the financial services sector. However, potential investors should consider the associated industry and business risks, including competitive pressures and regulatory changes. Monitoring the broader economic indicators and industry trends will also be crucial to managing potential investment risks effectively.
Long-Term Performance (6-10 years)
Angel One Ltd is poised to perform positively over the long term, anchored by its consistent operational metrics and strategic positioning within the financial services industry. The company’s Operating Profit Margin (OPM) has remained robust, peaking at 47% in recent quarters, indicating efficient operational management. Long-term growth is further supported by a Compound Annual Growth Rate (CAGR) in sales of 41% over the past five years, showcasing strong market demand for its services.
The company’s ability to sustain a low Debt to Equity ratio (0.84), coupled with high Return on Equity (ROE) figures averaging above 43%, suggests financial stability and effective use of shareholder equity. Given these factors, Angel One is likely to continue its growth trajectory, supported by its diversified service offerings in the booming financial services sector.
Short-Term Performance (2-5 months)
In the short term, the company may face some volatility due to current market conditions and recent negative trends, such as a 26.9% drop in returns over the last three months. The stock price closely aligns with its intrinsic value, indicating that it is fairly priced, but market sentiment driven by broader economic indicators or sector-specific news could influence stock performance. The company’s short-term prospects will likely be tied to quarterly performance metrics and market movements.
Medium-Term Performance (2-6 years)
Over the medium term, Angel One’s performance is expected to be stable with potential for significant growth, driven by the ongoing expansion of its service portfolio and increasing adoption of digital finance solutions. The company has shown a strong ability to grow its bottom line, with a profit growth of 70% over five years, suggesting effective cost management and revenue generation strategies.
The expansion in operating margins and sustained high ROCE (Return on Capital Employed) point towards efficient capital use and robust operational health. Assuming continued financial prudence and market expansion, Angel One is well-positioned to capitalise on the growing trend of digital financial services and an increasing client base in the medium term.
Overall Investment Recommendation
Considering the company’s strong operational metrics, strategic market positioning, and the growth trajectory in the financial services sector, Angel One presents a promising investment for both medium and long-term investors. However, short-term investors might need to be cautious due to potential market volatility. Continuous monitoring of the company’s financial health, market position, and external economic factors is recommended to time investments appropriately.