Buy HDFC Asset Management Company; target of Rs 3000: Prabhudas Lilladher

Prabhudas Lilladher's research report on HDFC Asset Management Company

HDFC AMC saw a strong quarter; while QAAuM growth was in-line (+8.1% QoQ), revenue was a 4% beat to PLe leading to better blended yields at 49bps (47bps in Q1’24). Increase in equity mix QoQ and decline in liquid share were major drivers of superior yields. Company remains a top performer in equity within 1-yr and 3-yr buckets while equity market share at 12.3% continues to enhance (+31bps QoQ). Retail presence improved suggested by 1) individual MAAuM higher than industry and 2) larger pie in unique investor additions. With HDFB gaining control post-merger, sales would be boosted due to stronger distribution focus. A rise of 10% in share of HDFCAMC sales by HDFCB could lead to a 4%/5% increase in AAuM and core profits. We see a core PAT CAGR of 13.6% over FY23-25E.

Outlook

Stock is trading at 32x; we maintain multiple at 35x (5-yr avg. of 40x) but as we roll forward to Sep’25E core EPS, our TP increases from Rs2,800 to Rs3,000. Retain BUY.