ICICI Securities Q3 Results Review - Robust Quarter, Healthy Performance Across Most Segments: Axis Securities

Axis Securities Report

In Q3 FY24, ICICI Securities Ltd. has been able to improve its market share in the cash segment to 13.1% versus 12.8% QoQ. However, in the retail derivative segment, the company’s market share declined by ~30 basis points to 3.4%.

Similarly, in the commodity segment, the company lost market share by ~30 bps QoQ. Mutual Fund assets under management market share has remained steady at 1.7%.

Update on focus areas -

Wealth Management: ICICI Securities added ~10,000 clients during the quarter. Total AUM grew by 25/10% YoY/QoQ.

Revenues grew by 56/12% YoY/QoQ. Blended yields improved to 42 basis points versus 40 bps. QoQ, led by improved yields in the recurring assets (+10 bps QoQ);

Derivative Segment:

In Q3 FY24, F&O orders/customers grew by 27/19% YoY. The sequential decline in revenue can be attributed to a lower number of trading days and yield contraction;

Loan Disbursements: ICICI Securities now offers home loans, personal loans, loans against securities and credit cards. The company distributed loans of Rs 21.7 billion (+116% YoY). The share of home loans dropped significantly to 35% versus 55% QoQ.

Revenue grew by 50/6% YoY/QoQ: Broking revenues were down 4% QoQ. Opex growth was modest at 39/3% YoY/QoQ, mainly led by higher interest costs. Ebitda (calculated) grew by 66/12% YoY/QoQ. Ebitda margins (calc.) stood at 68.9% versus 62.4/64.9% YoY/QoQ. Profit after tax grew by 66/10% YoY/QoQ.

Outlook: Improvement in cash market volumes resulted in improved market share. However, owing to lower trading days and on account of yield migration, the company lost market share in the retail derivatives segment.

The company has been treading on the focused efforts and we expect a similar performance to continue.

ICICI Securities will continue to invest in technology and the franchise, thereby keeping opex growth elevated.

We continue to maintain our ‘Under Review’ rating, given that ICICI Securities will be delisted.

Key risks to our estimates and target price

• The key risk to our estimates remains a slowdown in overall market volumes especially cash market volume as a large part of the broking revenues is contributed by the cash market volumes/turnover.

• The sector in which ICICI Securities operates is highly regulated and any change in regulations will hamper the efficient operations of the company thereby being a key downside risk to our estimates.

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