Recommendation from Software & IT Services Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.

Affle 3I : WHERE DATA CONVERTS TO GROWTH

HERE IS WHY
✓  Mobile-first ad tech for tomorrow
✓  Backed by patented tech innovation
✓  Scaling across high-growth verticals

According to IMARC Group, the global digital marketing market was valued at USD 410.66 billion in 2024 and is projected to reach USD 1,189.5 billion by 2033, exhibiting a CAGR of 11.22 per cent from 2025 to 2033. This growth is fuelled by surging internet and smartphone penetration, advancements in AI and data analytics, and strong consumer demand. India, a key growth driver, benefits from expanding digital infrastructure, rising disposable incomes, and a young, digitally savvy population, all of which have significantly boosted demand for digital advertising. Keeping this in mind, our Choice Scrip for this issue of the magazine is Affle’s 3i Ltd.

Affle is a global technology company with a proprietary consumer intelligence platform that delivers consumer recommendations and drives conversions through relevant mobile advertising. It powers unique and integrated consumer journeys for marketers, enabling high-ROI, outcome-led advertising through its Affle2.0 Consumer Platform Stack.

In Q4FY25, on a consolidated basis, the revenue of the company increased by 18.97 per cent YoY to ₹602.25 crore compared to ₹506.22 crore from the previous year’s same quarter. PBIDT excluding other income increased by 36.73 per cent to ₹133.97 crore YoY as compared to ₹97.98 crore from the previous year’s same quarter. Net profit stood at ₹103.07 crore compared to ₹87.49 crore, a YoY increase of 17.80 per cent, while sequentially it increased by 2.84 per cent from ₹100.22 crore.

In today’s tech-driven world, advertising is crucial for startups and brands to build visibility and engage customers effectively. Affle’s technology, including its Consumer Platform, enables these brands to leverage precise, data-driven advertising solutions for enhanced ROI. Affle has set a target of 20 per cent+ organic growth for FY2026, aligning with its mid-term 10x growth objective. This growth is anticipated from aggressive sales efforts and the consistent addition of new client accounts across all key regions. The company is also focused on deeper penetration across high-growth industry verticals, categorised as E, F, G, and H (e.g., e-commerce, gaming, fintech, healthtech). 71.1 per cent of the company's revenue comes from India and Emerging Markets, while 28.9 per cent comes from Developed Markets.

The company prioritises platform and product innovation, notably through AI-driven hyper-contextual creative generation at an exponential scale, incorporating GenAI-powered creative use cases. These technological advancements are expected to unlock intelligent use cases for advertisers, leading to a significant expansion of the addressable market. The company is also preparing for future complexities, such as driving conversions through authenticated AI agents acting on behalf of consumers.

On the valuation front, the shares of the company are trading at a PE of 71x, above the industry PE of 34.4x and five-year median PE of 66.8x. The company has a three-year ROE of 15.3 per cent and ROCE of 17.8 per cent. The company's three-year sales growth and profit growth stand at 28 per cent and 21.3 per cent respectively. Affle is well-positioned to capitalise on trends, leveraging its mobile marketing and data-driven platforms to deliver targeted advertising solutions. We recommend a BUY.