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Buy ICICI Securities Ltd For Target Rs.704 - Motilal Oswal Financial Services Ltd
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IB revenue and MTF book drive overall profitability
* ICICI Securities (ISEC)’s 4QFY24 revenue grew 74% YoY to ~INR15.4b (14% above our estimates). This was driven by growth in broking income in the Cash segment and growth in Investment Banking segment. Revenue for FY24 came in at INR50.5b.
* Allied activities revenue was up 84% YoY, contributing 28% to total revenue. This was mainly driven by 83% YoY growth in the MTF book.
* During the quarter, the C/I ratio came in at 53.4% vs. 52.9% in 3QFY24 (our estimate at 53.7%).
* ISEC reported EBITDA of INR11.5b (vs. INR9.1b in 3QFY24); up 26% QoQ. EBITDA for FY24 came in at INR34.4b.
* The company reported PAT of INR5.4b (12.3% higher than our estimate); up 104% YoY. PAT for FY24 came in at INR17b.
* The Board declared a final dividend of INR17 per share.
* Currently, the rating for the stock is ‘Under Review’.
Institutional broking revenue jumps 118% YoY
* The total institutional broking revenue (including allied revenue) came in at INR1,075m; up 118% YoY and 19% QoQ. The growth was attributable to momentum gains in Cash ADTOs and block deals.
* Average MTF book jumped 83% YoY to INR117.8b, and it continued to maintain the leadership position with a market share of ~20.4%.
* The market share of NSE Active clients declined to ~4.6% in 4QFY24 from 5.3% in 3QFY24.
Robust performance by Issuer services & advisory
* IB revenue, at INR1,045m, surged 8x YoY and grew 7% QoQ.
* It continues to have a strong pipeline of 18 deals, amounting to INR443b, and a mandate of 25 deals whose amount is yet to be decided.
* The distribution revenue declined 2% YoY but grew 9% QoQ to INR1.9b.
* MF AUM and SIP market share stood at 1.7% and 3.0%, respectively.
* ISEC distributed loans worth INR18.7b in 4QFY24; up 50% YoY.
Increase in the C/I ratio
* The operating costs mounted 55% YoY to INR8b (13.5% higher than our estimate). Employee costs rose 30% YoY to INR2.1b in 4QFY24.
* Other operating expenses for the quarter declined 30% YoY to INR587m.
* During the quarter, the C/I ratio came in at 53.4% vs. 52.9% in 3QFY24 (our estimate at 53.7%).
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