22 April 2021
4QFY21 Results Update | Sector: Financials
ICICI Securities
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
ISEC IN
322
136.7 / 1.8
569 / 308
8/-20/-25
293
CMP: INR424
TP: INR650 (+53%)
Buy
Strong customer acquisition; Distribution segment healthy
4QFY21 was another robust quarter in an overall strong year for ISEC. PAT
more than doubled YoY to INR3.3b (45% beat), driven by 54% growth in
revenue, coupled with significantly lower C/I ratio.
In FY21, ISEC delivered 50%/97% revenue/PAT growth. We increase our
FY22E/FY23E EPS estimate by ~10% to factor in healthy brokerage
revenue. Maintain Buy with a TP of INR650/share (18x FY23E EPS).
ISEC added 350k new customers v/s 139k QoQ.
Of this, 220k customers
were added through the Digital channel initiated last year. Around 55% of
such accounts are being opened by non-ICICIBC channels.
The activation rate jumped to 84% from mid-60s levels in the past two
quarters.
As a result, the number of NSE active clients increased to 1.6m
from 1.3m QoQ.
However, its cash market share dipped by ~100bp to 9.5% QoQ.
In the
F&O segment, ISEC’s market share had dropped to 3.5% in Dec’20 post the
implementation of new regulations. The company largely maintained its
market share (~3%) in 4QFY21.
Retail Broking revenue improved 7% QoQ to INR3.5b despite the
moderation in market share.
Distribution revenue was up 22% YoY to INR1.41b (QoQ not strictly
comparable due to seasonality). This was driven largely by all segments.
In MF distribution, the SIP count increased 12% YoY to 0.74m, while
ISEC’s market share improved 75bp YoY to 4.05%. Overall MF AUM was
up 20% YoY to INR413b.
The Institutional Equities segment delivered 30% YoY revenue growth to
INR480m. Given the buoyant capital market, revenue from Investment
Banking more than doubled QoQ to INR533m.
C/I ratio declined 200bp QoQ and 17pp YoY to 40%. The management
has guided at near term C/I ratio above these levels.
The lending book grew 37% QoQ to INR25.7b.
Financials & Valuations (INR b)
Y/E March
2021 2022E
Revenues
25.9
27.3
Opex
11.6
12.7
PBT
14.3
14.6
PAT
10.7
10.9
Ratios
C/I ratio (%)
44.7
46.5
PAT margin (%)
41.3
39.9
RoE (%)
70.4
55.0
Div. Payout (%)
65.0
70.0
EPS
33.1
33.9
Valuations
P/E (x)
12.8
12.5
P/BV (x)
7.5
6.4
Div. Yield (%)
5.1
5.6
Shareholding pattern (%)
As On
Mar-21 Dec-20
Promoter
75.0
75.0
DII
9.0
9.9
FII
3.7
4.6
Others
12.2
10.5
FII Includes depository receipts
Retail Broking: Pick-up in customer acquisition drives healthy topline
2023E
29.1
13.8
15.3
11.4
47.4
39.3
49.9
75.0
35.5
11.9
5.6
6.3
Strong performance in the distribution financial products too
Mar-20
79.2
11.5
3.2
6.2
Other highlights
Valuation and view
Changes in ISEC’s product and sourcing strategy have yielded results over the
past year. The ‘NEO’ plan has helped counter competition from discount
brokers as well as some traditional brokers who offer discount plans. We are
now seeing the digital sourcing model gain strong traction in terms of
customer acquisition. After a few turbulent years, the Distribution business has
stabilized. The impact of regulations on margin, coupled with overall trends in
industry volumes, would be key to watch out for in FY22E.
We raise our
FY22E/FY23E EPS estimate by ~10%. Maintain Buy with a TP of INR650 per
share (18x FY23E EPS).
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com) |
Piran Engineer
(Piran.Engineer@MotilalOswal.com)
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com) |
Divya Maheshwari
(Divya.Maheshwari@motilaloswal.com)
17 July 2020
are advised to refer through important disclosures made at the last page of the Research Report.
1
Investors
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