Buy HDFC Asset Management Company; target of Rs 4100: Prabhudas Lilladher

Prabhudas Lilladher's research report on HDFC Asset Management Company

HDFC AMC revenue/core income missed PLe by 4.5% driven by one-off TER impact. QAAuM at Rs6130bn was in-line. Blended yields declined by 3.3bps QoQ to 45.4bps (PLe 47.5bps). 50% of the fall was due to telescopic pricing as there was a change in TER slabs for ~53% of equity led by strong growth. 50% of reduction was driven by one-time fall in direct TER of some schemes due to underestimation of distributor payouts. However, blended yields have reverted to 47bps since 1st Apr’24. Equity performance within 1yr/3yr buckets remains best-in-class which has resulted in strong net flows’ market share of 20% in FY24 (vs 8.6% in FY23). Hence equity market share further expanded to 12.8% (+20bps QoQ). Over FY24-26E we see healthy core income CAGR of 17.0% led by higher than industry equity growth. Stock is trading at 35x on FY26E core EPS.

Outlook

We maintain multiple at 39x but increase TP to Rs 4,100 from Rs3,900 due to slight upgrade in earnings and increase in CPS. Retain BUY.

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