Angel One, one of India’s leading discount brokers, is poised for a potential uptick in its stock performance on October 15 after reporting strong financial results for Q2 FY25. The company witnessed a significant rise in both net profit and revenue, driven by increased trading activity and a growing market share in demat accounts. Key financial indicators showed robust year-over-year growth, with EBITDA margins improving despite rising expenses. Although the stock has underperformed this year, its impressive financial performance and client base expansion signal potential for upward movement.

Strong Profit Growth Drives Positive Outlook

In Q2 FY25, Angel One reported a 39.1% year-on-year increase in its net profit, which surged to Rs 423.4 crore. This was supported by a substantial growth in revenue, which climbed by 44.5% YoY to Rs 1,514.7 crore. This positive performance comes at a time when trading activity in India is flourishing, with more investors turning to the stock market, leading to greater trading volumes on the platform.

Angel One’s impressive financial growth reflects its ability to capture market share while benefiting from increased investor participation in equity markets, particularly among retail investors.

Operational Efficiency Leads to Strong EBITDA Growth

On an operational level, Angel One’s EBITDA grew by 51.5% YoY, reaching Rs 671.9 crore for the quarter. This robust growth was accompanied by a 210 basis point expansion in EBITDA margin, which rose to 44.4% compared to 42.3% in the previous year. The improvement in margin demonstrates the company’s enhanced operational efficiency, even in the face of rising costs.

The growing EBITDA indicates Angel One’s success in managing costs while maximizing its profit from higher trading volumes, a reflection of its solid market positioning.

Rapid Client Base Expansion Reflects Market Confidence

Angel One has been steadily increasing its share of India’s rapidly growing retail investment market. As of September 30, 2024, the company’s total client base grew by 61% YoY to 27.5 million, underscoring the growing trust and reliance of retail investors on its platform.

Notably, gross client acquisition rose by 41% YoY, with 3 million new clients added during the quarter. This growth not only highlights Angel One’s ability to attract new customers but also signifies the increasing trend of retail participation in the Indian equity markets.

Growing Market Share in Demat Accounts and Orders

Angel One continues to gain market share in the highly competitive discount broking space. The company’s share in total demat accounts in India rose to 15.7% for the Jul-Sep quarter, up from 13.2% in the same period last year, marking a 251 basis point increase. This indicates that Angel One is successfully positioning itself as a leader among its competitors, which include Zerodha, Groww, and Upstox.

The number of orders placed on the platform also saw a significant increase, with 489 million orders, a 44.5% YoY growth, reflecting the rising interest in trading activities among its users.

Increasing Share in Retail Equity Turnover

Angel One’s management remains optimistic about the company’s market share growth across all segments. The company now commands a 19.3% share in India’s overall retail equity turnover. Dinesh Thakkar, Angel One’s Chairman and Managing Director, emphasized the firm’s consistent improvement in market share across all segments, further solidifying its position in the retail brokerage space.

This growth in market share is critical as the company seeks to expand its footprint in an industry characterized by intense competition and rapid technological evolution.

Rising Expenses Due to Strategic Investments

While Angel One’s revenue and profit figures soared, its expenses also saw an uptick. The firm attributed this to higher costs related to employee onboarding and stock options, particularly in departments focused on wealth management, technology, product development, and data analytics. These investments are part of the company’s broader strategy to enhance its platform and deliver better services to its expanding user base.

Although these rising costs weigh on short-term margins, they are essential for long-term growth as the company invests in talent and technology to maintain its competitive edge.

Stock Performance: Underperformance and Potential Upside

Despite the company’s stellar earnings, Angel One’s stock has fallen by around 24% so far in 2024, underperforming the broader market. In comparison, Nifty has returned a 15% gain during the same period. However, over the last year, Angel One’s stock has risen by 31%, outperforming Nifty’s gain of 27%.

With the latest earnings report highlighting strong growth in profit, revenue, and client acquisition, Angel One’s stock may see renewed investor interest, potentially reversing its recent underperformance.

Conclusion: Strong Fundamentals Poised to Drive Future Growth

Angel One’s financial performance for Q2 FY25 highlights its ability to capitalize on India’s growing retail trading market. With robust profit and revenue growth, an expanding client base, and increased market share in key segments, the company is well-positioned for future success. While the stock has faced challenges this year, the strong quarterly earnings signal a potential upside as investors recognize the long-term growth prospects of this leading discount broker.