Axis Securities has given Buy recommendation for ICICI Securities with a target price of Rs. 865 in its research report issued on Apr 21, 2022

Axis Securitie’s research report on ICICI Securities

ICICI Securities Ltd. (ISEC) reported numbers stood below our and consensus estimates, mainly owing to lower brokerage income driven by weak market sentiments arising from the geopolitical tensions. While the momentum on the client addition has been strong YoY, it has moderated on a sequential basis. The digital sourcing and open architecture approach continue to aid new customer sourcing with ~80% of new customer additions coming from non-ICICI Bank channels vs ~69% in Q4FY21. The age group of the company’s customer base has also shifted with ~66% of customers being <30years vs 62% YoY. Similarly, a large part of the newly-sourced customers being Gen-Z and Millenials gives ISEC the opportunity to partner with them in their financial journey. Currently, 40% of the revenues are generated by this category of customers. The company’s revenue stood at Rs 892 Cr (+21% YoY, -5% QoQ), below our expectations of Rs 920 Cr, as broking revenues took a hit owing to weak cash segment volumes along with the issuer and advisory business which was affected by the geopolitical tension resulting in delays in issues. However, healthy growth in the distribution business revenues supported revenue growth. Despite Opex growth remaining flattish QoQ, the company’s C-I Ratio inched up to 49% owing to higher marketing costs and technology investments. The company’s EBITDA stood at Rs 563 Cr (+16% YoY, -7% QoQ) vs our expectation of Rs 585 Cr PAT stood at Rs 329 Cr (+3% YoY, -11% QoQ) vs. our expectation of Rs 362 Cr.

Outlook

We maintain our BUY recommendation on the stock with a revised target price of Rs 865/share (17x FY24E EPS), implying an upside of 38% from CMP.

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