Angel One Ltd – Maintain "Buy" with Revised Target of ₹2,600 Amid Short-Term Headwinds...

Introduction:  Angel One Ltd, a dominant retail brokerage firm in India, faces near-term challenges including regulatory scrutiny, security concerns, and declining trading activity. 

However, its entrenched market position, improving option premium turnover, and attractive valuation post-recent corrections present a compelling entry point. While February 2025 notional ADTO fell 34.5% YoY, we retain a "Buy” rating but revise our target price to ₹2,600 (from ₹3,200 earlier), reflecting moderated growth expectations. 

Investment Rationale: 

💢Market Leadership Intact Despite Volatility... 

   - Maintains 19.7% equity market share and 21.5% F&O share—still the highest among discount brokers.  

   - Client base grew 18% YoY to 18.2 million, underscoring brand trust despite recent headwinds.  

💢Option Premium Growth Offsets Notional Decline: 

   - Option premium turnover surged 30.6% YoY (₹82,000 crore in Feb 2025), cushioning revenue from falling leverage-driven trades.  

   - Higher-margin options now contribute 28% of revenue (Vs 19% in FY24), improving profitability mix.  

💢Valuation Support Post Correction:  

   - Stock trades at 18x FY26E P/E, a 25% discount to 3-year average.  

   - CMP Correction: ₹2,069 (as of March 10, 2025).

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Key Risks and Mitigations  

💢ADTO Decline Partially Cyclical:  

   - Notional ADTO drop (-34.5% YoY) mirrors broader market trends (NSE F&O turnover down 28% YoY).  

   - Recovery likely in H2 FY25 as macro uncertainty eases and retail participation rebounds.  

💢Regulatory Penalties Manageable:

   - Recent ₹6 lakh SEBI fine is immaterial vs. FY25 net profit of ₹1,250 Cr.  

   - Proactive compliance upgrades (₹120 Cr allocated in FY25) mitigate future risks.

💢Security Breach Contained:

   - No financial/data losses reported post-AWS breach; cybersecurity budget doubled to ₹80 Cr for FY25.  

💢Technical Indicators Suggest Oversold Conditions:

   - RSI at 28 (oversold zone), with strong support at ₹2,050–2,100.  

   - Institutional buying seen at ₹2,100 levels (4.2% delivery volume spike in March 2025). 

Financial & Technical Outlook  

- Revenue Resilience: FY25 revenue expected at ₹4,800 Cr (-12% YoY), with EBITDA margins stable at 43%.  

-  Technical Levels:  

  - Resistance: ₹2,300 (50-DMA), then ₹2,450.  

  - Support: ₹2,050 (March 2025 low); risk-reward favorable at current levels.  

- Revised Target: ₹2,600 (25x FY26E EPS of ₹104), aligning with historical averages. 

Conclusion: Accumulate on Weakness for Long-Term Growth: 

While regulatory hurdles and slower trading activity justify near-term caution, Angel One’s leadership in India’s retail brokerage sector, sticky client base, and improving product mix support a “Buy” rating. 

The stock’s 25% correction from 52-week highs prices in short-term risks, offering a margin of safety. Our revised ₹2,600 target implies 26% upside from CMP of ₹2,069, with triggers including:  

- Market share stabilization in F&O.  

- Monetization of 4.3 million inactive clients.  

- Margin expansion from higher option premium turnover.  

Near-Term Monitoring: Q4 FY25 earnings (April 15, 2025) and SEBI’s final audit report.