Accumulate HDFC AMC; target of Rs 2725: KR Choksey

KR Choksey's research report on HDFC AMC

QAAUM (Quarterly Average Assets Under Management) was at INR 4,857 Bn as of June 30, 2023, a growth of 17.0% YoY/ 2.5% QoQ. The market share in QAAUM stood at 11.3% of the mutual fund industry in this quarter, as against 11.1% in Q4FY23. In Q1FY24, revenue growth stood at INR 5,745 Mn, a growth of 10.2% YoY/ 6.2% QoQ. The EBITDA during Q1FY24 was reported at INR 4,286 Mn (excluding other income), which grew by 10.0% YoY/ 4.4% QoQ with margins at 74.6%. The cost-to-income ratio for the quarter stood at 22.0% as against 22.9% in Q4FY23 (vs. 27.8% in Q1FY23). Net profit for Q1FY24 grew by 52.0% YoY/ 26.9% QoQ at INR 4,775 Mn.

Outlook

HDFCAMC shares are currently trading at a P/E of 34.07x/29.7x on FY24E/FY25E earnings. We are applying a P/E multiple of 25.5x on FY25E EPS of INR 85.2 to arrive at a target price of INR 2,725 per share (earlier INR 1,970), an upside of 7.5% over the CMP. We maintain our rating of “ACCUMULATE” on the shares of HDFC AMC.