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Motilal Oswal Report
Angel One Ltd. stock price is down 38% year-to-date as the markets were anticipating regulatory actions on F&O segment. The consultation paper has cleared up the uncertainty. With regards to true-to-label charges, the company has highlighted that various levers will be used to fully offset the impact on revenues and margins.
For every 10% hit in true-to-label charges, earnings are hit by ~4%, and for every 10% hit in the number of orders, earnings are hit by ~12%. On the other hand, an Rs 2 per order increase in realizations can increase earnings by ~10%.
While pricing action on various aspects of the business can have an offsetting impact, optimising the cost is another lever. In the past, the company has slowed down customer acquisitions to keep costs under control intermittently.
Furthermore, in our estimates, we have not built in additional revenues from new products (fixed income and loan distribution) and new businesses (Wealth management, AMC, new push on associated persons). However, the incremental costs for these businesses are built into our estimates.
We are not changing our estimates yet as we await the final regulations. However, we cut our FY26E P/E multiple to 14 times to arrive at a one-year target price of Rs 3,000. Maintain Buy.
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