Reduce ICICI Securities; target of Rs 540: HDFC Securities

HDFC Securities recommended reduce rating on ICICI Securities with a target price of Rs 540 in its research report dated July 23, 2020.

Broker Research

July 23, 2020 / 19:12 IST

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.

Outlook

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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