Buy Affle 3i; target of Rs 2000: Anand Rathi

What happened

Anand Rathi kept a BUY rating on Affle 3i with an unchanged target price of Rs 2,000. Affle's Q2FY27 revenue rose 21.2% year on year, and the company announced the acquisition of Israel-based Perion Network.

Confirmed

Global impact / market context

The Perion deal adds a large acquisition to Affle's growth plan, but the report's Rs 2,000 target value is based on estimated earnings that leave Perion out, so reported results after the deal could differ from the numbers behind the target.

Analyst inference

Revenue growth of 21.2% and EBITDA growth of 24.2% show the core advertising business expanding, but gross profit margin slipped to 37.5% from 38.8% as data and inventory costs rose, which means profit per sale weakened.

Analyst inference

What to watch

1. Affle's management reiterated guidance of over 20% organic growth for the current fiscal year and beyond, with internal execution plans set at 25%, anchored on its cost-per-converted-user model and deep industry focus. Confirmed
2. Watch whether Anand Rathi later adds Perion's revenue and profit into its estimates and target price, since the current Rs 2,000 target and 43x earnings valuation explicitly exclude Perion's numbers. Proposed
3. Track gross profit margin, which fell to 37.5% from 38.8%, and data and inventory costs at 62.5% of revenue; further increases would pressure profit per sale even if revenue keeps growing above 20%. Analyst inference

Evidence

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