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Target: ₹720
CMP: ₹596.50
ICICI Securities (ISEC) reported 11 per cent q-o-q decline in PAT, largely in line with our expectation for 14 per cent q-o-q decline. This was driven by lower investment banking income (as expected) and broking revenue (slight miss).
In our monthly sector notes, we have been highlighting that range-bound cash trading volumes and rising derivatives (F&O) volumes are more beneficial to discount brokers than traditional brokers.
The company gained 30bps market share in cash volumes in the quarter while its F&O market share was largely stable. With management planning to make large investments in technology and marketing, we raise our FY23-25CL cost-to-income ratio to 51 per cent+. This leads to a slight cut in FY23/24CL estimates.
The MTF + ESOP funding book continues to scale up – it grew from ₹6,600 crore to ₹7,200 crore q-o-q. However, we believe the strong growth in this book achieved over the past two years will slow down due to choppy markets and new regulations impacting ESOP funding.
Distribution income was up 3 per cent sequentially, yet 6 per cent below our estimate due to a miss on mutual fund distribution revenue.
Maintain Outperform on reasonable valuations with lower target price of ₹720 (16x FY24CL EPS) (₹750 earlier).
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