Affle India’s dream run on the bourses, since its listing, has been hit by the Covid-19 pandemic. A technology platform that enables advertisers to do targeted advertising has lost nearly half of its peak value.
However, given the asset light business model, marketing efforts and more precisely targeted & personalised advertisements, Affle India is expected to witness higher revenues while cost have remained relatively unchanged.
In FY19, consolidated revenues rose 49.1% YoY while PAT increased 75.4% YoY. Despite this robust growth, revenues are just a fraction of the overall mobile advertisement market, representing tremendous scope for growth.
The company continues to benefit from network effect, leading to improvement in operating or the EBIT margins to 24.1% in FY19 from 1.9% in FY17.
Going forward, it is expected that the network effect will to continue to impact revenues and profitability over a sustained period leading to higher returns.
Affle India helps advertiser to measure the effectiveness of advertisement as it charges only when a user downloads an app or completes a transaction.
Affle, through its various platforms like data management platform, fraud detection platform and real time inventory buying ad inventory helps advertisers deliver more relevant & engaging experiences to consumers, which is more likely to lead to the desired action, such as downloading of an app or the purchase of a product or service. This differentiates Affle from its cost per click peers and helps advertisers generate higher return on investment.
Mobile advertisement has seen tremendous growth at 41% CAGR in 2016- 19 led by rising smartphone penetration, low data tariffs and young demographics. Going forward, mobile advertising is expected to increase at a CAGR of 35% in 2019-25.
Further, in a post Covid world, it is expected that there will be a significant shift among consumers to adopt digital technology across the world especially in India & other emerging markets.
Further, within verticals, e-commerce activity may witness robust growth. It will be a key segment driving digital ad spend in future. Affle generates 75% of its revenues from India & Emerging markets. Within verticals, it generates more than 50% of revenues from e-commerce making it a key beneficiary of changing digital trends in future.
Affle also has an asset light business model while its marketing efforts and more precisely targeted & personalised advertisements has bought in higher revenues while cost have remained relatively unchanged
Lower data prices and availability of unlimited content for entertainment, multimedia, information and business applications has led to an impulsive usage of the internet, leading to significant growth in mobile data traffic This, in turn, has led to tremendous growth in digital advertising, especially on mobile in India.
Digital advertising has increased at a CAGR of 30% in India in 2016-19 wherein digital ad spend by verticals the top spenders are FMCG, (accounts for 27% of digital spends), e-commerce (19%), consumer durables (11%), BFSI (10%) and telecom (9%).
Affle has 2.02 billion consumer profiles (571 million consumer profiles in India, 582 million in other emerging markets and 867 million in developed markets) and over 300 billion data points through its data management platform.
Net net we hence believe that Affle has a very strong asset light business model which will rapidly grow over the next 3-5 years. In the near term some cuts backs in ad spends on digital may be witnessed but this is unlikely to fundamentally change the inherent demand potential going ahead
This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.