Anand Rathi Securities

Target: ₹1,220

CMP: ₹969.25

As mobile-app transactions get more traction and become mainstream, we believe demand for Affle’s user acquisition-and-retention solutions should grow manifold. Management focus on profitability has created sustainable high-growth and cash-flow generation.

According to Juniper research, despite app-store privacy changes by Apple and Google that are hitting advertisers, global mobile ad-spend will increase from $295 billion in 2021 to $350 billion in 2022, growing 18.6 per cent year-on-year and driven by in-app growth as brands strive to secure consumer trust.

While dominance in the industry is largely of companies operating on clicks, views and impressions, Affle primarily earns revenue from a ‘consumer platform’ on a ‘cost-per-converted-user’ basis. Affle earns revenue only if it successfully converts its audience into customers, which we believe is less cyclical.

We initiate coverage on Affle India with a Buy rating and a target of ₹1,220 (based on DCF, assuming 12 per cent WACC and 6 per cent terminal growth rate, implied PE of 45x FY24 EPS) as greater spending on mobile advertising, tapping connected devices, deeper penetration in the top-10 verticals, newer regions, tier-2 and -3 cities in India drive Affle’s long-run growth.

Risks: Data protection and privacy policy could affect the business.