Buy HDFC Asset Management Co; target of Rs 5095: KR Choksey

KR Choksey's research report on HDFC Asset Management Co

In Q3FY25, revenue growth stood at INR 9,344 Mn, an increase of 39.2% YoY/ 5.3% QoQ, led by strong AUM growth and sequential improvement in blended yields. Revenues were 2.9% lower than our estimates. Net profit for Q3FY25 grew by 31.0% YoY (+11.2% QoQ) to INR 6,415 Mn, driven by strong operating performance and a lower tax rate compared to prior quarters. HDFCAMC’s expansion into thematic and sector-specific funds, coupled with its efforts to rationalize distributor commissions, has bolstered its market position and enhanced cost efficiency during the quarter. We revised our EPS estimates downwards for FY26E and FY27E by 9.0% and 10.1%, respectively, as the company is shifting towards lower-cost strategies, including an increased on passive funds resulting in equity yields falling, thus resulting in reduced revenue.

Outlook

We are applying a P/E multiple of 35x on FY27E EPS of INR 145.6 to arrive at a target price of INR 5,095 per share (earlier INR 5,388), an upside of 25.9% over the CMP. However, given the recent share price correction, we have upgraded our rating to “BUY” from “ACCUMULATE” on the shares of HDFCAMC.