About Company
Affle is a global technology company with a proprietary consumer intelligence platform that delivers consumer engagement, acquisitions, and transactions through relevant Mobile Advertising.
The Company operates in a Large Global TAM (Total addressable market) of $65 Billion (5.2 Lakh Crore) which is expected to grow at 30% for the next few years at least.
The Company is very small in the larger scheme of things, but with Presence in India and Other Emerging Markets with strong R&D and having access to Large Number of Data Points the Networking Effect that Affle can bring to the table for Advertisement is hard to match.
Business of Affle India
Based on preference, Interest and activity company creates data points for targeted digital marketing
Uses Artificial Intelligence, Machine learning, Deep learning algorithms to generate consumer insights
Company's consumer intelligent platform provides consumer acquisition, engagement, and transactions through mobile ads
Two major business segments
1) Consumer platform (97% revenue) - Acquire customers via mobile ads. The leading market position in India and has a huge competitive advantage with marketing reach of 2.5 billion plus connected devices
2) Enterprise platform (3% revenue) - Mobile app development, Development of e-commerce websites, data analytics services
Large number of the mobile ads that you see on apps and websites are via Affle India. In year FY21 Company processed 750+ billion data points, filed 18 patents, converted 7.23 crore users in India
Opportunity Size
Total world digital as spends stand at $571 billion, out of which relevant addressable market for Affle India is $84 billion (excluding spending on devices other than mobile, Ad spending's on SMS/MMS and social media). This relevant market share of $84 Billion is expected to grow $184 billion by 2025 at 30% YoY growth
US and China digital ad spending's are 70 times and 40 times bigger than India and have shown growth of 18.5% and 26.5% in last 10 years
India on the other hand while in a Developing Stage is going to be a beneficiary of 2 Trends that the World has witnessed/has been witnessing:
Increasing Screentime by people across the world. This trend has been accelerated because of COVID
Growth in Internet Usage Supported by o New Users Buying Smartphones directly or Shifting from Non-Smart Phones to smartphones and also Existing Users Using more Data.
Online shoppers in India have increased from 100 Mn in 2017 to 220 Mn in 2021 (doubled in 4 years), Smartphone users have increased from 300 Mn to 460 Mn in last 4 years. While still 42% of Mobile users are non-smartphone users. There will be strong growth in smartphone users in India with Low cost of internet available in India.
According to the research done by Datareportal, Worldwide, the Average Person spends a Total of 6 Hours and 57 minutes looking at a Screen each day (That’s more than 1/4th of our Day). More than half i.e. 53% of this time is spent on Mobiles.
Mobile ad spending is also increasing rapidly along with internet users in India
Competitive strength of Affle India
- Proprietary predictive and recommendation algorithm (moment customer looks for product or service, relevant ads will be visible in real time)
Own in house cloud computing infrastructure to store TBs of data about customer behaviors
Asset light and scalable model, minimum expenses
CPCU model (Cost per converted user) instead of current practice of clicks or views they charge on conversion and hence highly reliable for advertisers
Huge focus on user privacy and data protection with many parents filed for data privacy systems
Competition
Even though company has strong competitors like Facebook and google, it has managed to grow its revenues at 60% CAGR in last 4 years. The digital advertising market is so huge that Affle india is like Small Shark in the Ocean. It has potential to grow at double digits
Major competitors include:
1) Facebook
2) Google
3) Inmobi
Future growth –
Since, Covid average screen time and online buying, subscriptions have increased significantly. Digital economy in India has crossed inflection point and is on rapid growth trajectory.
Major parameters include
1) Young population
2) Increased smartphone usage
3) Online education
4) Fintech
5) E-commerce
6) Healthcare usage
7) Telecom
Company growth and Valuation
Affle India IPO came in Aug 2019 at 745 Rs and was listed at 25% premium
Digital Advertisement industry worldwide is expected to grow excess of 30% in next 5 years
The company has Revenue growth of CAGR 59.5% and Profit growth of CAGR 66.5% in the last 4 years.
With OPM (operating margins) of 25%. ROE is 27.9% and ROCE is 28%
Affle is going global with increasing its export share from 53% to 64% since 2019 and showing strong presence in Major geographies
Company has fixed assets and investments worth 1824 Crore which is 9 times their last years profit of 215 crores
Unbelievable growth numbers with even higher future potential and one of the fastest growing small cap company.
Company trades at 72 PE which has come down from PE of 164 last year and is same PE at which company used to trade during pre-covid period. Company trades at 46 PE of expected FY24 earnings and stock price has to at least double in next 2 years to have average PE in industry.
Company has Highest growth, Low debt, Good assets and cash reserves, High promotor share, and Strong FII investments. Stock is trading near Major support level of 1250 in charts and trading above 200, 100 and 50 EMA average