Affle India: The New AI Frontier

There's a point in time when specific themes appear to "accelerate" and there is an explosion of interest around it.

Venture capitalists pour big money and allow innovators to hit their stride in building technology, products, and companies.

An area where we can clearly see an acceleration currently is in artificial intelligence (AI) sector.

AI has made so much progress in such a short period of time that it's easy to see a world 3-5 years from now where the average worker would interact with, or using, AI on a daily basis.

Releases of various AI models (including but not limited to ChatGPT and Bard) have captured the enthusiasm and attention of founders and investors.

And the stock firing all cylinders within this space is none other than Affle India.

Affle India has become a powerhouse in big data and AI-driven analytics in the past three decades.

Established in 1994, Affle's innovative data integration and analysis approach has set new standards. The company went public via a direct listing in July 2019.

Affle India - Leading Focus on Innovation from the Front

Affle India is a new-age technology company specialising in mobile marketing and advertising technology.

It delivers user acquisitions, recommendations and conversions through relevant mobile advertising for top brands and B2C companies globally.

Its customer base has expanded to include some of the big names in India and the world over, such as McDonald's, Apollo, Byjus, Swiggy, Zee5, etc.

It has recently expanded its services to include AI and ML solutions and is confident of the increased adoption of AI in the digital advertising space.

The company charges advertisers every time a conversion happens (cost per converted user).

The higher the conversions, higher the revenues for Affle India...and higher the returns for advertisers.

The company has recently filed for 15 patents, all related to artificial intelligence (AI).

The newly-filed patents include the systems and methods for transferring personalised machine learning or AI models and data, systems and methods used for detecting fraud through AI agent testing etc.

Affle has now built robust patent portfolio with 18 patents filed in India, the US, and Singapore. It has three patents granted in the areas of Consumer Acceptable Advertising in the US.

A Close Look at its Financials

Affle India has strong financials that have helped it grow sustainably through tech innovation, market expansion, and consolidation.

Besides this, the company has minimal debt on its books.

The company's success can be attributed to its various strategic acquisitions and efforts to increase mobile penetration in the country where it operates.

The company's revenue and profit have grown substantially, reporting a 4-year CAGR of 54.6% and 49.8%, respectively. The 5-year average RoCE and RoE stand at 40.8% and 40.3%, respectively.

The company is confident of strong growth going forward. Earlier this year, the company reported that its business has been growing faster than the industry over the last 3 years.

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	2,494	3,338	5,168	10,817	14,340
Growth (%)	-	34%	55%	109%	33%
Operating Profit	707	940	1,712	2,848	3,431
OPM (%)	28%	28%	33%	26%	24%
Net Profit	488	655	1,350	2,147	2,455
Net Margin (%)	20%	20%	26%	20%	17%
ROE (%)	67.4	43.5	45.9	28	18.7
ROCE (%)	74.5	43.1	39.4	28	20.2
Dividend (Rs)	0	0	0	0	0
Debt to Equity (x)	0.1	0.3	0.3	0.1	0.1

Data Source: Ace Equity

Although cash rich, it does not distribute dividends, choosing to plough back the excess cash generated by the business.

It is using the cash to grow organically and inorganically, acquiring tech companies and investing in subsidiaries.

In the digital advertising segment, Affle India competes with InMobi, a global mobile advertising and discovery platform.

Globally, it competes with industry giants like Google Ads and Facebook Ads, which are also prominent players in this space.

How Affle India has Performed Recently

In the past one month, the stock has gained 10%.

In 2023 so far, Affle India has displayed muted performance, rising just 11% while other stocks are more or less close to their all time high levels.

Affle India has a 52-week high of Rs 1,269 touched on 20 December 2023 and a 52-week low of Rs 875 touched on 15 May 2023.

Here's a table comparing Affle India with its peers.

Comparative Analysis

Company	Affle India	Info Edge	CMS Info	Quess Corp	Allsec Tech
ROE (%)	18.7	0.5	21.6	9.1	22.3
ROCE (%)	20.2	1.1	29.9	12.9	31.2
Latest EPS (Rs)	18.9	-1.9	20.7	16.2	33.7
TTM PE (x)	64.6	0	18.6	31.7	19.7
TTM Price to book (x)	7.3	3.3	3.6	2.8	3.9
Dividend yield (%)	0	0.4	1.2	2.3	3.1
Industry PE	55.2
Industry PB	3.6

Data Source: Ace Equity

To know more, check out its financial factsheet and latest quarterly results.

In conclusion, we believe Affle India will play a pivotal role as artificial intelligence fundamentally changes the human experience.

It will be fun to watch how and when that happens, along with which founders, investors, and companies like Affle are involved in creating a better world for us all to live in.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...