Zaggle Prepaid Ocean Services: PAT up 266% & Revenue up 83% in H1-25 at a PE of 74
Guidance of 50-55% organic revenue growth with adjusted EBITDA margin of 11-13% in FY25. 50% revenue CAGR guidance for next 3 years. Acquisitions to add to the organic growth.
1. Why is ZAGGLE interesting
zaggle.in | NSE: ZAGGLE
ZAGGLE sees strong tailwinds and 50% organic revenue CAGR for the next 2-3 years with margin expansion. Inorganic growth on top of the organic growth expected. Rich valuations in the short term, do not fully capture the opportunity over the longer term. 2. SaaS-based fintech: Spend Management company
3. FY20-24: PAT CAGR of 9% & Revenue CAGR of 52%
4. FY24: PAT up 92% & Revenue up 40%
5. Strong Q2-25: PAT up 145% & Revenue up 64% YoY
PAT up 11% & Revenue up 20% QoQ
6. Strong H1-25: PAT up 266% & Revenue up 83% YoY
7. Strong outlook: Organic growth of 50-55%
See Tremendous Tailwinds And 50% Growth For Next 2 To 3 Years: Zaggle Prepaid Ocean Services
i. Organic Revenue growth of 50-55%
FY25 guidance of 50-55% looks conservative given the growth seen in H1-25 or else it indicates that H2-25 would see tepid growth.
FY25: Given our strong performance this quarter, we are upping our guidance to 50 to 55% growth in our top line for FY25. (guidance increased from 45-55% growth)
FY24-26: We remain very confident of doubling our FY24 revenues,
which were Rs. 775 crores, to double in the next two years.
ii. Improvement in margins
FY25: We expect our adjusted EBITDA to hold steady around current levels.
Every effort is being made to increase the adjusted EBITDA to expand to 15%-16% by FY27-28.
iii. Inorganic growth over and above the organic growth guidance
We continue to explore inorganic opportunities with companies in the spend management space. We are in active discussions with a few players across synergistic domains like payments, B2B SaaS, NBFCs, etc.
We are looking to try and close something in the second half, preferably Q3.
Any inorganic growth would be over and above this
8. PAT growth of 266% & Revenue growth of 83% in H1-25 at a PE of 74
9. Hold?
If I hold the stock then one may continue holding on to ZAGGLE
Based on H1-25 performance, ZAGGLE is on track to deliver as per the FY25 guidance of 50-55% revenue growth and 11-13% adjusted EBITDA margin.
Reduced interest costs to drive PAT margin expansion in FY25
Following the recent IPO, the company has successfully repaid INR470 million in borrowings, which is expected to result in reduced finance costs starting from H2. In the future, we will realize significant interest cost savings, resulting in a meaningful shift towards the profitability.
ESOP costs have been a drag on the bottom-line and are expected to reduce going forward which will drive PAT margin expansion in FY25 and FY26
ESOP costs: FY '24, it is going to be roughly about INR19 crores and the going forward, which is '25 and '26, it will be minuscule about INR4 crores or so is, what is our guidance
Have headroom for growth for next 3-4 years without needing money.
So, sir, we have raised about INR490 crores from the IPO and it is sufficient for our next three years to four years of growth. It would -- if unless and until we go ahead and do an inorganic acquisition, where we might require some external funding. We do not see any signs of needing money in the next two to three to maybe let's say three to four years.
Business momentum is strong and expected to continue into the rest of the year
ZAGGLE management is confident of growth
I think we do not see any specific head winds for our business. We see more and more confidence growing with corporate customers and banks to work with us as a profitable listed entity.
10. Buy?
If I am looking to enter ZAGGLE then
ZAGGLE has delivered PAT growth of 266% and revenue growth of 83% in H1-25 at a PE of 74 which makes the valuations fully valued over the short term.
ZAGGLE is guiding for revenue growth of 50-55% in FY-25 at a PE of 74 which makes the valuations fully valued from a FY25 perspective.
With an FY24-26 outlook for 50% top-line CAGR with organic growth by Q3-24 and higher bottom-line growth on account of falling ESOP costs & interest costs a PE of 74 can be sustained over the longer term given that ZAGGLE management claims that the growth estimates are conservative
At a 74 PE, the margin of safety in ZAGGLE is quite low to sustain even a single weak quarter.
Previous coverage of ZAGGLE
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