Buy Affle for 60% upside. It has a unique business model, unmatched network effects & prudent acquisition strategy

Affle has a unique business model, unmatched network effects & prudent acquisition strategy. It is well-positioned to capitalize on growth in digital advertising in high-potential sectors such as e-commerce, fintech, gaming & entertainment. TP ₹2538 (60%) 

Strong revenue growth with margin expansion

In Q2 FY25, Affle (India) Ltd. (Affle) reported a strong topline growth of 26% on a YoY basis, delivering 95 Mn conversions at a CPCU rate of Rs. 57.1. This resulted in CPCU revenue of Rs. 5,416 Mn, reflecting an increase of 35.2% on a YoY basis. During the quarter, developed market revenue showcased a strong growth of 27.5% on a YoY basis, contributing ~27% of total revenue. However, gross margin contracted by 51 bps due to rising inventory costs as the Company continues to refine its platform offerings with premium inventory and deeper ecosystem partnerships. The quarter also marked the highest-ever EBITDA and PAT, growing at 30% and 38% respectively on a YoY basis.

View & valuation

Affle achieved strong revenue growth, coupled with margin expansion fueled by operating leverage, resulting in significant gains in EBITDA and PAT. This performance is driven by the Company’s continued investment in operational efficiency, leveraging synergies from its consumer platform, and integrating GenAI capabilities into its operations. As digital advertising continues to expand in India and other emerging markets, it is well-positioned to capitalize on this growth, particularly in high-potential sectors such as e-commerce, fintech, gaming, and entertainment. With a unique business model, unmatched network effects, and a prudent acquisition strategy, we have revised our estimate and maintain our BUY rating on Affle with a target price of Rs. 2,538 (60x FY27E EPS).