ICICI Securities - Buoyant performance - CLSA

Retail equity participation drives growth; sustainability key for earnings

ICICI Securities reported 1QFY21 PAT of Rs1.9bn (up 70% YoY) on strong core retail equity broking business performance but partly offset by weaker distribution revenue. Lower equity prices, paperless e-KYC leading to faster customer onboarding, a higher proportion of equity volumes vs derivatives and new open architecture likely drove buoyant 1Q core performance. We raise FY21CL EPS estimates 18% to factor in strong 1QFY21 earnings but expect revenue growth to normalise as the buoyant retail equity participation that drove 1Q performance subsides. We increase FY2022 estimates by a modest 3% but maintain our BUY rating with target price raised from Rs450 to Rs625 based on 24x Jun-22CL PE.

Strong performance on core equity business

ICICI Securities reported strong 1QFY21 core retail broking business revenue, up 62% YoY and 24% QoQ, on higher 1Q retail participation in equity markets. The company reported 27% YoY growth in active trading clients, 35% YoY growth in average daily turnover (ADTO) and 100bp higher market share QoQ. Lower equity prices, digital customer onboarding via e-KYC, a higher proportion of equity volumes vs derivatives and new open architecture likely drove 1Q performance. Under the new open architecture that started in 4QFY20, non ICICI Bank customers can now open an account with the company; this led to diversification of sourcing channel mix away from ICICI Bank (65% contribution in 1QFY21 vs 80% in FY20).

Distribution fee partially offsets core business gains

Strong performance in the equity business, however, was partly offset by expectedly weak distribution business performance as mutual fund distribution revenue declined 12% YoY and insurance distribution revenue declined 36% YoY. While mutual fund distribution revenue was impacted mainly due to debt funds, market share increased in equity funds. Insurance distribution revenue was hindered by weak premium growth during 1Q. Margin trade financing (MTF) and Esop funding book rose 1.6x to Rs15bn from Rs5.8bn in 4Q.

Raise estimates; sustainability of revenue growth key for earnings momentum

We raise FY21CL EPS estimates 18% to factor in strong 1QFY21 earnings but expect revenue growth to normalise as the buoyant retail equity participation that drove 1Q performance subsides. We increase FY22CL estimates by a modest 3% but maintain our BUY rating with a target price raised from Rs450 to Rs625 based on 24x Jun-22CL PE.

Shares of ICICI Securities Ltd was last trading in BSE at Rs.530 as compared to the previous close of Rs. 532.25. The total number of shares traded during the day was 19894 in over 958 trades.

The stock hit an intraday high of Rs. 538.55 and intraday low of 527.15. The net turnover during the day was Rs. 10601647.

Source : Equity Bulls

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