Buy HDFC Asset Management Company; target of Rs 2800: Prabhudas Lilladher

Prabhudas Lilladher is bullish on HDFC Asset Management Company has recommended buy rating on the stock with a target price of Rs 2800 in its research report dated July 25, 2023.

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July 26, 2023 / 11:12 IST

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Prabhudas Lilladher's research report on HDFC Asset Management Company

We raise multiple for HDFCAMC from 27x to 35x (5-yr avg. of 40x) as core PAT is upgraded by 7.0% for FY24/25E, due to higher revenue given strong AuM growth in FY24E. Equity growth may outpace industry (+13% YTD) given (1) market share gains from healthy net flows led by superior performance and (2) concerns around TER impact on earnings have been allayed as SEBI will release a new consultative paper. HDFCAMC saw a mixed quarter; despite higher QAAuM 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 1-yr and 3-yr buckets while it also moved to rank-1 in the 5-yr bucket. Equity market share is rising and touched 11.9% (+13bps QoQ).

Outlook

Over FY23-25E, we see a core PAT CAGR of 12.7% (earlier 8.7%) with stable core income of 35-36bps. Stock is currently valued at 31x on FY25E core EPS. We raise TP from Rs2,100 to Rs2,800. Retain BUY.

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