HDFC Securities recommended reduce rating on ICICI Securities with a target price of Rs 540 in its research report dated July 23, 2020.
HDFC Securities' research report on ICICI Securities
Increased cash market activity is expected to boost broking revenue by 16.3% YoY in FY21E. We believe this would be cyclical, and as volatility and retail participation recede, we expect ISEC’s market share to drop back to ~8%. We remain concerned about discount brokers acquiring a higher share in active clients and believe the yields would remain pressured. We expect a muted year for distribution income (-10.7% YoY) as average MF assets and life insurance sales could remain subdued. We expect the C/I ratio to improve substantially to 50.8% in FY21E, driving FY21/22E PAT growth of 18.5/3.9% YoY.
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 rating with a target price of Rs 540, i.e. 25x FY22E EPS.
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