Buy HDFC Asset Management Co; target of Rs 4235: KR Choksey

KR Choksey's research report on HDFC Asset Management Co

In Q4FY24,revenue stood at INR 6,954 Mn, an increase of 28.6% YoY/ 3.6% QoQ. Revenues were 6.3% lower than our estimates due to the fall in blended yields. EBITDA was reported at INR 5,393 Mn (excluding other income), which grew by 31.4% YoY/ 5.4% QoQ with margins of 77.5%. EBITDA margins expanded by 165 bps YoY and 136 bps QoQ during the quarter, led by healthy revenues. EBITDA was 4.9% lower than our estimates due to lower-than-expected sales, but margins were better than our estimates of 76.5%. Net profit for Q4FY24 grew by 43.8% YoY/ 10.5% QoQ to INR 5,411 Mn, led by higher other income and a lower tax rate at 20.0%. Thus, these two factors resulted in a 7.2% higher net profit than our estimates. We revised our EPS estimates upward for FY25E and FY26E by 2.1% and 8.5%, respectively, primarily driven by higher AUM growth.

Outlook

However, we remain cautious in the near term due to pressure on flows, pricing, and regulatory risks. We are applying a P/E multiple of 37x on FY26E EPS of INR 114.5 to arrive at a target price of INR 4,235 per share (earlierINR 4,005), an upside of 16.1% over the CMP.