Introduction
Hey friends! Today, We’ll discuss a popular tech company that has provided good returns over the past year. Investors have high expectations due to these strong returns, but today we’ll do a logical analysis to understand realistically how much CAGR (Compound Annual Growth Rate) this stock can deliver going forward.
Stock Performance
The company we’re talking about today is Affle India Limited. Currently, Affle India’s stock price is down about 2%. However, looking at recent charts, it has delivered approximately 4% returns in the last 5 days, more than 15% returns in the last month, around 2% returns in the past 6 months, and an impressive 55% return over the past year. Although the stock has declined slightly during the recent market downturn, it’s down only about 13% from its peak, similar to the overall market decline represented by Nifty.
| Time Period | Return |
|---|---|
| Last 5 Days | +4% |
| Last Month | +15% |
| Last 6 Months | +2% |
| Last 1 Year | +55% |
| Last 5 Years | +756% |
If we look at a longer period, Affle India has given huge returns of around 756% in the past five years, making it a significant multi-bagger. Such impressive returns naturally attract many investors. However, since January 2022, the stock has been in a consolidation phase for about three years, and hasn’t generated much profit for investors recently.
Company Overview and Financials
Let’s look at some numbers now:
- Market Cap: Around ₹22,000 crore (mid-sized company)
- Debt: Minimal (₹135 crore), debt-free because it has much more cash
- PE Ratio: Around 62, meaning investors expect rapid growth
- Recent Growth: Sales grew 20%, and profits grew about 30% last quarter
- PEG Ratio: Around 2 (higher than ideal)
Currently, Affle India has a market cap of about ₹22,000 crore, making it a mid-cap company. The stock has a high PE (Price-to-Earnings) ratio of around 62. However, the company’s Return on Equity (ROE) is healthy, above 15%. It has minimal debt of about ₹135 crore but holds much more cash, essentially making it a net debt-free company.
Last quarter, its sales grew by 20%, and profits grew by 30%. Given the earnings growth rate of 30% compared to its PE ratio of 62, its PEG (Price/Earnings-to-Growth) ratio is approximately 2x. Ideally, a PEG ratio under 1 is considered good value, but Affle India’s PEG is currently higher than ideal, indicating that it might not fit the “Growth at Reasonable Price” investing model.
Looking at Affle India’s long-term performance, it’s shown consistent growth since 2016. The operating profit margins have remained stable around 20-21% for the past four years, and profit has also steadily increased from ₹215 crore to ₹366 crore in four years. Additionally, the company has rapidly increased its fixed assets, contributing significantly to its recent growth.
Shareholding Pattern
Here’s how the ownership of Affle looks right now:
| Shareholder Type | Ownership (%) |
|---|---|
| Promoters | 55% |
| Foreign Investors (FIIs) | Slight increase |
| Domestic Institutions | Slight decrease |
| Individual Investors | Dropped from 3.5 lakh to 2.75 lakh |
Regarding the shareholding pattern, promoters currently hold about 55%, down slightly from previous quarters (from 59% to 56%, and now 55%). Foreign institutional investors (FIIs) have slightly increased their stakes, a bullish indicator, while domestic institutions slightly reduced their positions. The number of individual shareholders has dropped dramatically from over 3.5 lakh to around 2.75 lakh, probably due to frustration from the prolonged consolidation phase, causing many investors to exit.
Future Growth Expectations
Past performance aside, what matters now is Affle’s future. To understand this, we refer to a recent research report by Mirae Asset, which uses their unique 3R analysis framework (Right Sector, Right Quality, Right Valuation). Mirae Asset rates Affle positively in terms of sector and quality, but they give a neutral rating on valuation, meaning it’s neither undervalued nor excessively expensive.
According to Mirae Asset’s analysis, after interacting with Affle’s management, they expect the company to grow revenues by about 20% annually, particularly through fiscal year 2025 and continuing in subsequent years. The growth will be driven by strong industry trends, particularly in connected TVs, mobile commerce, and privacy-focused advertising, where Affle is strategically positioned. Management is confident about sustaining this growth momentum.
Affle has also strategically positioned itself against potential challenges like currency fluctuations and tariff issues, especially in the US market, through unified team structures and integrated platforms. Moreover, Affle’s adoption of AI and technology platforms has improved operational efficiency, reducing employee and inventory costs. The company is strongly committed to cost optimization, and higher margins are expected in the future.
Valuation and Price Targets
Regarding future valuation, Mirae Asset estimates Affle’s forward PE ratio at 58 by FY25, 48 by FY26, and 38 by FY27. They have set a price target of ₹1880, which seems modest compared to its current price around ₹1623.
If we look at a simple financial modeling, Affle’s EPS (Earnings Per Share) is expected to grow from ₹27 currently to ₹41.8 by FY27. Now, deciding what valuation multiple (PE ratio) Affle deserves is key. Given the expected growth rates—22% in FY26 and 26% in FY27—a PE of around 50 could be reasonable for a technology company with strong growth. Using this assumption, the stock price could potentially reach around ₹2090 in two years, suggesting a CAGR of about 13.5%.
Historically, Affle traded at an average PE of around 66 due to exceptionally high valuations at certain times, but recently valuations have normalized. Valuations aren’t permanent and can shift over time due to market conditions and investor sentiment changes. Other premium stocks, like Asian Paints and Bajaj Finance, have seen sharp valuation drops recently, indicating Affle’s PE could also drop further from current levels.
Here’s a simplified expectation for future profits:
| Year | Expected EPS (₹) |
|---|---|
| 2027 | 41.8 |
If investors give Affle a reasonable valuation (around 50 times earnings), the stock price could reach around ₹2090 in two years. This represents about a 13.5% annual growth rate—not bad, but maybe not amazing either.
Risks to Consider
There are some important risks:
- Big companies might enter Affle’s market and increase competition.
- Changes in privacy laws and regulations could affect operations.
Conclusion
Right now, even though Affle is growing well, its stock is quite expensive. At today’s high valuation of around 62 times earnings, some investors think it’s too pricey and risky. If the valuation falls, it could offset profits. A better deal might appear if the stock trades around 35 to 40 times earnings.
In short, Affle India is a good company with solid growth prospects but might be a bit expensive currently. If the price drops, it could become more interesting.
Hope this helps you understand better. Let us know if you want to know about other companies too!
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