ICICI Securities Stock Falls On Market Share Loss In Third Quarter
ICICI Securities Ltd.’s stock fell after the brokerage reported a drop in market share in the quarter ended December.
The company’s market share fell from 8.9% in the quarter ended September to 6.5%, which, according to CLSA, was because of a drop in the derivatives segment share.
“The new margin norms, effective December 2020, have impacted intra-day volumes for ICICI Securities more than other players, given the higher leverage it offered,” CLSA said in a note. “The company’s ability to achieve scale with new offerings will be critical for market share gains,” the research firm said, reducing its price target on the stock to Rs 540 apiece from Rs 625.
CLSA now expects the company’s FY22/23 earnings to decline 10-17% over FY21, with normalised capital market activity in FY22 and a drop in derivatives market share.
Shares of ICICI Securities slumped as much as 20% in early trade on Wednesday but recovered most of the losses to trade 4.1% lower at Rs 427.25 apiece as of 10.50 a.m.
Results highlights (year-on-year)
- ICICI Securities’ revenue rose 47% to Rs 619.8 crore in the third quarter, led by a 49% growth in broking and distribution revenue.
- Net profit nearly doubled to Rs 266.9 crore.
- Operating profit increased 80% to Rs 396.7 crore
- Ebitda margin expanded to 64% from 52.2%.
- Cost-to-income ratio fell to the lowest ever at 42% on account of a reduction in employee expenses.
- Client addition for the quarter was the highest ever at 1.39 lakh, one-third of which were from the open architecture platform or non-ICICI Bank customers.
According to Motilal Oswal, the company’s product and sourcing strategies have yielded results over the last two years and this may continue in the foreseeable future, given the intense competition in the sector. “ICICI Securities’ path to profitability improvement is attributable to its cost-cutting initiatives, which it has been executing very well,” Motilal Oswal said in a note.
Of the 11 analysts tracking ICICI Securities, 10 have a ‘buy’ rating and one suggests a ‘sell’. The average of Bloomberg consensus 12-month price targets implies an upside of 30.4%.