ICICI Securities research report on HDFC Asset Management Company
HDFC AMC reported an EBITDA of INR 4.3bn, up 4% QoQ (highest in last 21 quarters wherein the average EBITDA was ~INR 4bn). There is strong improvement in fund performance which has led to superior business metrics such as gain in equity market share, unique investor share, and gain in flow market share in equity segment across channels. Higher AUM accretion from parent channel post-merger is also an available tailwind. We have increased our valuation multiple from 25x to 30x core EPS in line with these positive trends along with expected lower regulatory impact on TERs. However, post the 43% stock price rally since Apr’23, there is limited upside the considering the constant lag in revenue growth compared to AUM growth. The lag is due to telescopic pricing, fresh flows and other factors like regulation and competition.
Outlook
Downgrade to HOLD (from Add); valuations and key assumptions Our valuations are based on 30x FY25E (earlier 25x) core EPS of INR 74 (earlier: INR 61) and cash of INR 339 per share to arrive at a revised target price of INR 2,550 (earlier: INR 1,865).
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