IIFL Securities Ltd: PAT growth of 84% & Revenue growth of 51% in H1-24 at a PE of less than 11

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

1. 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.
2. 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.
3. 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
4. The management unwilling to provide any outlook for the future makes IIFLSEC a difficult call to take.
5. 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.
6. 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