HDFC AMC Q1 Results Review - Equity Market Share Continues To Improve: Prabhudas Lilladher
Core earnings in-line at Rs 3.0 billion; revenue miss was offset by lower opex.
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Prabhudas Lilladher Report
We raise multiple for HDFC Asset Management Company Ltd. from 27 times to 35 times (five year average of 40 times) as core profit after tax is upgraded by 7.0% for FY24/25E, due to higher revenue given strong assets under management growth in FY24E. Equity growth may outpace industry (+13% year-to-date) given-
market share gains from healthy net flows led by superior performance and
concerns around total expense ratio impact on earnings have been allayed as Securities and Exchange Board of India will release a new consultative paper.
HDFC AMC saw a mixed quarter; despite higher quarterly average assets under management growth, core income was a miss due to lower yields and higher opex. However, core profit was protected due to lower tax rate.
Company remains top performer in one-year and three-year buckets while it also moved to rank-1 in the five-year bucket.
Equity market share is rising and touched 11.9% (+13 bps QoQ). Over FY23-25E, we see a core profit after tax compound annual growth rate of 12.7% (earlier 8.7%) with stable core income of 35-36 basis points.
Stock is currently valued at 31 times on FY25E core EPS. We raise target price from Rs 2,100 to Rs 2,800. Retain 'Buy'.
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