Buy HDFC Asset Management Company; target of Rs 4700: Prabhudas Lilladher

Prabhudas Lilladher's research report on HDFC Asset Management Company

HDFC AMC saw a good quarter as revenue was 1.5% higher to PLe owing to better-than-expected yields at 46.2bps (PLe 45.5bps) led by strong growth in equity QAAuM of 11.5% QoQ to Rs4.1trn. Core income saw a slight miss as opex escalated QoQ owing to (1) higher staff cost due to employee addition and engagement expenses, and (2) higher other opex led by costs related to the NFO, business, KYC, etc. Equity performance within the 1-year/3-year buckets remains best-in-class, which resulted in strong net flows’ market share of 20% in FY24 (vs 8.6% in FY23). We raise the core EPS for FY25E/FY26E by 5%/7% due to upgrade in FY25E closing equity AuM for the industry from 13% earlier to 28% since equity growth from Mar-Jun’24 has been strong at 16.4%. Over FY24-26E, we see healthy core income CAGR of 22% (earlier 17%).

Outlook

We increase multiple to 41x from 39x and raise TP to Rs4,700 from Rs4,100. Retain ‘BUY’.