Buy HDFC Asset Management Company; target of Rs 4600: Prabhudas Lilladher

Prabhudas Lilladher's research report on HDFC Asset Management Company

HDFCAMC saw a soft quarter as core income missed PLe by 2.3% due to revenue being 1.7% lower led by weaker yields at 46.6bps (PLe 47.5bps) as (1) equity share fell QoQ to 60% from 61% to market correction in Feb’25 and (2) Q4FY25 has 2 lesser days (vs Q3FY25). Equity performance within the 3-yr bucket remains superior, which resulted in strong net flows’ market share of 12.9% in FY25. New ESOP scheme of 2.5mn shares has been approved which is awaiting shareholder approval. Hence, we raise staff cost for FY26/27E by 7%/3%. Closing equity AuM for the industry corrected by 3.0% over Dec’24- Mar’25 and markets continue to remain volatile. Equity flows for the industry have contracted to Rs272bn in Mar’25 from Rs462bn in Dec’24. Owing to lower expected industry flows and higher staff cost in FY26/27E, we cut core EPS for FY26/27E by ~3.3%.

Outlook

We keep multiple at 35x but increase TP to Rs 4,600 from Rs4,450 as we roll forward to Mar’27 core EPS. Retain ‘BUY’.