ICICI Securities: Analysts turn gung-ho on strong Q1 show

KS Badri Narayanan Chennai | Updated on July 24, 2020 Published on July 24, 2020

CLSA, Motilal Oswal set higher price target for I-Sec

Shares of ICICI Securities, which rose sharply on Thursday after the company came out with a strong quarterly results and positive outlook, closed slightly weak on Friday, due to profit booking. However, analysts, who generally feel broking space to do very well in the immediate term due to expansion of market, remain more positive on ICICI Securities in that space.

The stock settled at ₹537.30, down 0.88 per cent, over the previous day's close on the BSE.

ICICI Securities has reported a 70 per cent jump in profit after tax (PAT) to ₹193 crore in the April-June quarter, as against ₹114 crore, it had reported in the year-ago period. Its revenues surged 36 per cent to ₹546 crore (₹402 crore), aided by strong growth in equities and allied business. Lower equity prices, paperless e-KYC leading to faster customer on-boarding, a higher proportion of equity volumes vs derivatives and new open architecture likely drove buoyant Q1 said CLSA analysts, Mohit Surana and Adarsh Parasrampuria.

“We raise FY21 EPS estimates 18 per cent to factor in strong Q1-FY21 earnings but expect revenue growth to normalise as the buoyant retail equity participation that drove Q1 performance subsides,” CLSA said and added: “We increase FY22 estimates by a modest 3 per cent but maintain our buy rating with a target price raised from ₹450 to ₹ 625 based on 24x June-22”.

Fruitful initiatives

According to Motilal Oswal Financial, I-Sec is a classic play on increasing the financialisation of savings and retail participation in equity markets. Thus, its business and profitability is very cyclical.

“However, during the downcycle of the past two years, the company took several initiatives to make its business leaner and well-geared for the upcycle. Initiatives such as the ICICI Bank tie-up, ‘Prime’, ‘Prepaid’ and ‘Options 20’models, etc. have started yielding results,” said Motilal Oswal, which increase the price target to ₹625 with a buy recommendation.

However, another domestic brokerage firm, HDFC Securities and its competitor, has recommended ‘reduce’ on ICICI Securities with a price target of ₹540.

“Given the highly cyclical nature of the business, we are concerned that we may be closer to peak earnings and worry that the market may be ascribing a closer-to-peak multiple. We maintain a reduce with a target price of ₹540,” Madhukar Ladha, Institutional Research Analyst, HDFC Securities, said.

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Published on July 24, 2020
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