CLSA
ICICI Securities (Buy)
CMP: ₹228.7
Target: ₹310
For 1QFY20, I-Sec reported a 15 per cent y-o-y drop in profit to ₹110 crore due to weaker top-line growth, but it was still a tad ahead of our estimates. Adjustments towards a tax-refund, an MTM on corporate bonds (Dewan Housing) and a rise in rent costs due to accounting changes were neutral for its Q1 profit, but incrementally higher rent costs drive some cuts in our earnings estimates. We were encouraged to see the new arrangement with ICICI Bank has helped improve client activation by 40 per cent and new initiatives like Prime focus ing on NRI clients and the cross-selling of loan products can add to earnings.
ICICI Bank’s 45 million debit card clients (6.8 million credit cards) can provide a large funnel of clients to ICICI Securities, which has just 0.9 million active broking clients. Improvement in its earnings outlook can support a rerating and we maintain our ‘buy’ recommendation with a target price of ₹310.