ICICI Securities hits new low; falls 19% in one week on weak Q3 results

Shares of ICICI Securities were trading under pressure for the fifth straight trading session, hitting a new low of Rs 223, down 2 per cent on BSE, after the company reported a weak set of numbers for December quarter (Q3FY19). The stock of a part of the ICICI Group and a leading investment services firm in India was trading at its lowest level since listing on April 4, 2018.

In the past week, post Q3 results, ICICI Securities has dipped 19 per cent after it reported a 34 per cent year-on-year (YoY) fall in consolidated net profit at Rs 101 crore for Q3FY19. It had posted profit of Rs 154 crore in the year-ago quarter. The company saw revenues fall of 18 per cent YoY to Rs 396 crore. In comparison, the S&P BSE Sensex was up 2 per cent during the week.

During the fiscal, there were several short term headwinds like volatile market, non-banking financial companies (NBFC) liquidity crisis, frozen state of the primary market, and significant regulatory changes, which impacted the overall business sentiment and performance, ICICI Securities said in a statement.

The company’s broking/distribution revenues declined 17/12 per cent YoY to Rs 230/110 crore, while investment banking revenues declined 37 per cent YoY to Rs 26 crore. EBITDA declined 33 per cent YoY as management was able to reduce costs only by 3 per cent YoY.

“Mutual fund distribution revenue declined significantly at Rs 60 crore (-21.7 per cent YoY) as Sebi has banned up-fronting of distribution commissions. Management stated that this would impact yields in FY20E and that it expected a decline of around 25-30% from the levels seen in FY18,” analysts at HDFC Securities said in result review.

“We are disappointed by management’s guidance of the cost to income (C/I) of better than 50 per cent by FY22E and believe that being a technology-driven broker, ICICI Securities has the ability to reduce operating leverage. This becomes even more critical given the cyclicality of broking revenues. As all major segments of the business are under pressure we downgrade stock to NEUTRAL with a target price of Rs 298 (+8.6%) based on 16x Dec-20E EPS. Our multiple is premised on growth opportunities, market leadership and ICICI Securities’ strong financial products distribution franchise,” the brokerage firm said.

At 12:50 pm, ICICI Securities was trading 1.4 per cent lower at Rs 225 on BSE against 0.67 per cent rise in the S&P BSE Sensex. A combined 136,533 equity shares changed hands on the counter on the BSE and NSE so far.