ICICI Securities falls 1% as CLSA downgrades rating, earnings view

Shares of ICICI Securities declined 1.3 per cent on Wednesday to Rs 418 after CLSA cut its earnings estimate for the stock amid thinning volumes in the cash-market segment.

Shares of the largest listed brokerage have nearly halved this year.

“Over the past six months, we have been highlighting the dichotomy in trading volumes, with cash equity trading volumes being flat-to-marginally down, while futures and options (F&O) volumes consistently rising. Such a scenario is negative for traditional brokers like ICICI Securities whose revenue depends primarily on cash volumes,” said CLSA in a note.

It has lowered the revenue estimates for 2022-23 through 2024-25 by 8-11 per cent and earnings estimates by 13-18 per cent due to lower broking and allied income.

CLSA downgraded the stock from ‘outperform’ to ‘underperform’ and cut the target price from Rs 720 to Rs 450 (12x its estimated earnings for 2023-24).

Sharp spikes in market volatility and changing regulatory landscape have led to a drop in cash-market volumes, even as F&O volumes hover around record levels.

“Given the trend of declining cash delivery, as well as change in mix of intraday versus cash delivery, players strong in the cash delivery segment are likely to be impacted more. On the other hand, those more dependent on the F&O segment are seen to be better positioned,” said Vijay Chandok, managing director and chief executive officer, ICICI Securities.