Buy HDFC Asset Management Company; target of Rs 5360: Prabhudas Lilladher

Prabhudas Lilladher's research report on HDFC Asset Management Company

HDFC AMC saw a good quarter as revenue was 2.8% higher than PLe owing to better-than-expected yields at 46.8bps (PLe 45.5bps) led by strong growth in equity QAAuM of 14.8% QoQ to Rs4.7trn, which resulted in core income beat of 2.5%. Yields inched up QoQ as the company rationalized net yields in Aug’24 and Sep’24 across 10-12 schemes. Core PAT was a miss due to DTL impact. Equity performance within the 1-yr and 3-yr buckets remains best-in-class, which resulted in strong net flows’ market share of 14.6% in H1FY25. We raise core EPS for FY25E/FY26E by ~8% each due to upgrade in FY25E closing equity AuM for the industry from 27% earlier to 40% since equity growth from MarSep’24 has been strong at 30% (8% flows and 22% MTM). Over FY24-26E, we see healthy core PAT CAGR of 27% (earlier 22%).

Outlook

Stock is valued at 34x on Sep’26 core EPS. We maintain multiple at 41x, but raise TP to Rs5,360 from Rs4,700 as we roll forward to Sep’26. Reiterate ‘BUY’.