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IIFL Securities Ltd: PAT growth of 84% & Revenue growth of 51% in H1-24 at a PE of less than 11
A strong performance in H1-24 supported by reasonable valuations however consistency in delivering strong performance needs to be seen.
1. Broking, financial product distribution & investment banking
Investment banking: Ranked #1 for IPOs in FY23 and 1H FY24
We have three segments which are targeting.
- One is institutional broking where our team continues to do well. We are known for our research.
- Investment banking again in the mid-market space we're trying to build capacities and
- Last, but not the least is I would say instead of derivatives broking or chasing market share in broking we were more focused on the financial planning on the affluent segment.
2. FY18-23: Bottom line up & down, no clear growth trajectory
3. Weak FY23: PAT down 19% and Revenue up 10% YoY
4. Strong Q1-24: PAT up 72% and Revenue up 40% YoY
5. Strong Q2-24: PAT 44% & % Revenue up 24% YoY
PAT 94% & % Revenue up 60% QoQ
6. Strong H1-24: PAT up 84% & Revenue up 51% YoY
7. Business metrics: Strong return ratios
8. Outlook: Strong PAT growth in FY24
i. Management unwilling to provide any outlook for the future
9. PAT growth of 84% & Revenue growth of 51% in H1-24 at a PE of less than 11
10. So Wait and Watch
If I hold the stock then one may continue holding on to IIFLSEC.
- Based on H1-24 performance, IIFLSEC looks on track to deliver the strongest yearly performance
- The past record during FY18-23 has seen bottom line going up & down, with no clear growth trajectory. Hence one needs to watch and decide on IIFLSEC at a quarter to quarter level. One doesn’t want to get stuck with a stock where the business is not showing a clear growth trajectory.
11. Or, join the ride
If I am looking to enter the stock then
- IIFLSEC has delivered PAT growth of 84% & Revenue growth of 51% in H1-24 at a PE of less than 11 which makes valuations quite attractive.
- IIFLSEC quoting at a price of Rs 118.4 on a book value of Rs 50.2 implies its available a price to book of 2.4X which is reasonable for the H1-24 performance delivered.
- Given that FY24 looks like being the biggest year in the last five years. Hence it is a good entry point for the stock. However, a track record of delivering growth makes it a risky bet
- The management unwilling to provide any outlook for the future makes IIFLSEC a difficult call to take.
- The potential for a less than 11 PE moving to a a mid teen PE is easily possible if IIFLSEC is able to deliver growth consistently across quarters. The potential of a PE re-rating could provide multi-bagger upside in the stock over the medium term.
- One needs to keep track the developments around SEBI’s order debarring IIFLSEC from onboarding new clients
SAT stays SEBI's order debarring IIFL Securities from on boarding new clients
