Should you invest in ICICI Securities after 61% y-o-y growth in Q1 profit?

ICICI Securities has a client base of around 5.8 million, of which 3.9 lakh were added during the quarter.

Should you invest in ICICI Securities after 61% y-o-y growth in Q1 profit?

Analysts see over 20% upside in ICICI Securities after it posted 61% growth in net profit at Rs 311 crore for the quarter ended June 30 due to growth in topline and some improvement in margins. The company had posted a profit of Rs 193 crore in the same quarter last year. Topline of the brokerage grew 37% y-o-y to Rs 748 crore from Rs 546 crore.

Should you invest?

Global brokerage CLSA upped the target price for ICICI Securities to Rs 925 per share, citing strong customer acquisition to support growth momentum. It also lifts earnings per share (EPS) estimates by 30%. Motilal Oswal is also positive on ICICI Securities with a price target of Rs 915.

“Strong momentum in the capital market, coupled with a healthy deal pipeline in investment banking, has led us to raise our FY22E and FY23E EPS estimate by around 19% and 25%. Operating leverage remains huge in this business.” Motilal Oswal Financial Services said in a report.

Business updates

ICICI Securities, a part of the ICICI Group, has a client base of around 5.8 million, of which 3.9 lakh were added during the quarter, which is the highest ever addition in a quarter. Digital sourcing continues to demonstrate strength with around 2.7 lakh customers added through this channel during the quarter.

In Q1FY22, equities and allied business, which comprises retail equity, institutional equity, lending towards ESOP (Employee Stock Option Plans) and MTF (Margin Trade Funding), Prime and NEO subscription fees and other charges, rose 30% on-year to Rs 509 crore. The retail equities and allied businesses reported revenues at Rs 466 crore, up 30% vs Rs 358 crore in Q1FY21.

ESOP and MTF interest income rose 258% year-on-year to Rs 82 crore in Q1FY22 and the average book for these businesses stood at Rs 3,630 crore for Q1FY2022, against Rs 950 crore for Q1FY2021. Prime subscription income grew 57% y-o-y to around Rs 16 crore.

“Our open architecture digital acquisition model, is also witnessing encouraging traction with over 75% of new accounts being opened by non-ICICI Bank channels. The company has over 2.19 million active clients and over 1.85 million NSE active clients (those having traded on the NSE in the last 12 months), up 45% and 65% YoY respectively,” ICICI Securities said in a report adding total client assets stood at Rs 4.4 lakh crore on June 30 against 2.4 lakh crore a year ago.

CLSA further added that the equities segment benefitting from sectoral tailwinds and diversification of revenue streams underway.

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