ICICI Securities surges 7% to hit 7-month high on strong growth prospects

Analysts anticipate the broking revenue to remain stable in FY24, while expect strong growth in the distribution business and in interest income, led by strong growth in the MTF book

Shares of ICICI Securities rallied 7 per cent to hit seven-month high of Rs 560.95 in Friday’s intra-day trade on strong growth prospects. In the past three months, the stock has surged 28 per cent.

The stock of stock broking and allied services company quoted at its highest level since November 2022. It had hit a 52-week high of Rs 577.70 on November 14. In comparison, the S&P BSE Sensex was down 0.03 per cent at 63,220 at 12:48 pm.

ICICI Securities has four business segments: broking (equity, derivative, etc.), distribution of financial products (loans, insurance, PMS, etc.), investment banking, and Private Wealth Management (PWM), which provide a varied revenue mix.
 

To stabilise its brokerage revenue, ICICI Securities has successfully implemented subscription models. Additionally, the growth of its Margin Trading Facility (MTF) business has reduced its reliance on brokerage revenue, which now makes up only 37 per cent of the overall revenue mix in FY23 compared to 55 per cent in FY20. The company's wealth business, too, has grown remarkably at 59 per cent CAGR over FY20-23.

Analysts at Keynote Capitals anticipate the broking revenue to remain stable in FY24, while expect strong growth of 21 per cent in the distribution business and 23 per cent in interest income, led by strong growth in the MTF (margin trading facility) book.

Based on estimates, the cost-to-income ratio will fall from 45 per cent in FY23 to 40 per cent in FY24, leading to a rise in profit after tax by 31 per cent YoY in FY24.

With its strong growth prospects and diversified business portfolio, the brokerage firm recommended a 'buy' rating for ICICI Securities, with a target price of Rs 588.

According to analysts at Motilal Oswal Financial Services, ICICI Securities has seen tough times in the recent past due to high linkage of its revenue to broader equity markets. This, therefore, has translated into a sharp decline in broking revenue as its dependence on cash volumes has been relatively higher. 

ICICI Securities is now on the course of diversifying its revenue with the launch of several tools and products for the derivatives segment. Besides, the company has intensified its focus on increasing the penetration of MTF among its customers.

"The launch of new distribution products – loans and general insurance – will further enhance revenue in due course," the brokerage firm added.