ICICI Securities plummets 6% as Q4 net tanks 23% on higher cost of funds

Shares of ICICI Securities plummeted over  6 percent in early trade on April 20 after the company posted a 22.8 percent on-year decline in its net profit for the quarter ended March.

The company’s net profit came at Rs 262.7 crore for the January-March period as against Rs 340 crore during the corresponding quarter a year ago. ICICI Securities attributed the decline to an increase in cost of funds and franchise along with a rise in spending on technology.

The broking company’s topline slipped around 1 percent on-year to Rs 884.8 crore in Q4 from Rs 891.7 crore a year ago. A decline in retail cash average daily turnover (ADTO) and muted capital markets resulted in the weak topline.

The company’s Q4 earnings also disappointed on the operational front as EBIDTA (earnings before interest, taxes, depreciation, and amortisation) margin contracted to 62 percent in January-March, down from 63.2 percent in the year ago period.

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The broking company’s weak earnings are in stark contrast to that of industry peer Angel One, which reported a 31 percent year-on-year rise in net profit on a revenue growth of 21.2 percent in the quarter under review.

Also Read: Angel One spurts on 30% profit growth but slowing activation rate remains a concern

Investors also reacted negatively to the disappointing quarterly performance and at 09.26 am, shares of ICICI Securities were trading 3.81 percent lower at Rs 443.50 on the National Stock Exchange.

Three lakh shares of the company changed hands on the exchanges so far, as against the one-month daily traded average of two lakh shares.

Here’s what brokerages have to say

Global research and broking firm Citi anticipates near-term cost pressures and market led pangs to weigh on ICICI Securities‘ earnings. Despite that, the brokerage firm sees traction in the company’s distribution and wealth segments as the key silver linings for ICICI Securities. Citi has a ‘sell’ rating for ICICI Securities, with a target price of Rs 440 per share, which reflects a 4.5 percent downside potential from Wednesday’s closing price.

Domestic brokerage firm Motilal Oswal Financial Services attributed ICICI Securities’ weak quarterly performance to the high linkage of its revenue to
broader equity markets. The firm believes that this has translated into a sharp decline in broking revenue as its dependence on cash volumes has been relatively higher. MOFSL, however, remains optimistic and believes that the launch of new distribution products –loans and general insurance – will further enhance revenue for ICICI Securities in due course. On that account, the broking firm retained its ‘buy’ rating for the stock with a target price of Rs 530.

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