Affle India Shares Rally 10% After Robust Q2 Numbers; Nomura Expects Further Upside

Shares of mobile advertisement firm Affle (India) Ltd rallied nearly 10% in intra-day trade on Monday after the company on Saturday said its consolidated net profit jumped 51% year-on-year to Rs 15.58 crore for the second quarter ended September (Q2).

At 2:42 pm, Affle India shares were trading at Rs 1,506.10 apiece, up 7.9%, after hitting the day’s high of Rs 1,530. Notably, the stock has already more-than-doubled from its issue price of Rs 745 since its August listing this year.

“The growth in Affle’s consumer platform business was well supported by the overall consumer trends of greater time spent across connected devices, increased adoption of online payments and consistent growth in digital marketing spends across key industry verticals...,” company's chairman, MD and CEO Anuj Khanna Sohum said in a statement.

He remained optimistic about the future and told CNBC TV18 that the second half of FY20 should be better than the first. “The company is consistently investing in the growth areas. We have increased our investment in technology. We expect bottomline efficiency to kick in going ahead,” he said.

After the results announcement, Japanese brokerage firm Nomura initiated coverage on the Affle India stock with a ‘buy’ rating and set a target price of Rs 1,900, implying 36% potential upside from its previous close.

“We initiate with a buy on Affle, a leading digital AdTech player in India. We think the underlying macro is attractive in Affle’s key markets (India and Southeast Asia), where a large internet user base, rising smartphone sales, improving data connectivity and young demographics augur well for the shift to digital,” Nomura said.

The brokerage firm added that digital advertising spends are expected to post faster compounded annual growth rates of 32% and 18% in India and Southeast Asia, respectively, against 15% globally over FY18-21. Despite this, the penetration in these two markets is expected to remain low at 25-30% by FY20-21 against 54% globally, thereby offering a long runway for growth for Affle.