ICICI Securities Ltd. share price target

With increased competitive intensity and changing mix, broking yields are expected to further decline. Additionally, regulatory reduction in MF TERs continues to pressure distribution revenues in the short term. Cost control will be a key earnings driver (~14.4% YoY in FY20E). We expect FY19-22E APAT CAGR of 12.7%. A rally in equity markets coupled with increased retail participation remains a key risk to our call. Higher than expected distribution and IB revenues offsets softer broking revenues. Cost decline is lower than expectation. We increase FY20E/21E/22E APAT estimates by 7.6/8.1/9.0% to build in better distribution and IB outlook. We rate ISEC a NEUTRAL with a TP of Rs 288 (14x Sep-21E EPS).

With increased competitive intensity and changing mix, we except broking yields to continue to decline. Additionally, regulatory reduction in MF TERs continues to pressure distribution revenues in the short term. Cost control will be a key earnings driver (~-10% YoY in FY20E) and we await detailed management commentary on the same. We expect an anemic FY19-22E APAT CAGR of 5.4%. A rally in equity markets coupled with increased retail participation remains a key risk to our call. Despite softer revenues, better cost management aided ISEC to report an in-line 1QFY20. ISEC continues to diversify its revenue streams (distribution of bank products) and focus on cost reduction, as challenges to its core broking and distribution revenue continue. We rate ISEC a NEUTRAL with a TP of Rs 225 (14x Jun-21 EPS).

With increased competitive intensitywe except broking yields to decline further. Additionally, regulatory reduction in MF TERs will pressure distribution revenues. The only silver lining we see is the emerging cost consciousness. We expect an anemic FY19-21E PAT CAGR of 4.8% p.a. Longer than expected rally in equity markets coupled with increased retail participation remains a key risk. We rate ISEC a NEUTRAL post weaker than expected 4QFY19. Challenges to revenue and earnings growth continue due to increased competition and regulatory pressures. Our TP stands at Rs 235 (14x FY21E EPS).

As all major segments of the business are under pressure we downgrade stock to NEUTRAL with a TP of Rs 298 (+8.6%) based on 16x Dec-20E EPS. Our multiple is premised on growth opportunities, market leadership and ISEC's strong financial products distribution franchise. ISEC reported a disappointing 3QFY19 with revenues/PAT at Rs 3.9bn/1.0bn (-18/-34% YoY). Broking/distribution revenues declined 17/12% YoY to Rs 2.3/1.1bn, while investment banking revenues declined 37% YoY to Rs 256mn. EBITDA declined 33% YoY as management was able to reduce costs only by 3% YoY.

We initiate with a BUY rating and TP of Rs 352 (+19.1%). ICICI Securities (ISEC) is one of the strongest retail investing platforms for direct equities (9.2% vol. market share). The company has retained its market leadership position despite intense competition. ISEC has also built a strong financial products distribution business (26.2% of revenues). We believe that ISEC will be a key beneficiary as financialization of savings grows.

IPO NOTE

ICICI Securities Ltd. (ISEC) is a leading technology based securities firm in India that offers a wide range of financial services including brokerage, financial product distribution and investment banking; and focuses on both retail and institutional clients....

company is the largest equity broker in India since fiscal 2014 by brokerage revenue and active customers in equities on the NSE. The electronic brokerage platform provides an integrated interface that allows its customers to track various portfolio parameters, including the performance of their investments. The company operates through 200 owned...

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Incorporated in 1995, ICICI Securities (a subsidiary of ICICI Bank) is headquartered in Mumbai and has its operations across India, United States, Singapore and Oman. It operates through its 200 own branches along with 2600 branches of ICICI Bank and also associated with 4600 sub brokers, authorised persons, independent financial associates and independent associates across 500 cities. It is a leading technology-based securities company in India that offers a wide range of financial services such as distributing various 3rd party financial products which includes mutual funds, insurance products, loans, and pension products, the advisory services which includes financial planning, equity portfolio advisory, access to alternate investments, retirement planning and estate planning, brokerage services and also capital markets services which include management of public equity offerings, share buybacks, tender offers and equity private placements. It has also ventured into investment banking business and offers equity capital markets services and other financial advisory services to corporate...