Buy HDFC Asset Management Company; target of Rs 5700: Prabhudas Lilladher

Prabhudas Lilladher's research report on HDFC Asset Management Company

HDFCAMC saw a strong quarter as core income was 1.8% more than PLe due to revenue being 2.7% higher. Revenue yields were better at 46.7bps (PLe 45.5bps) as (1) equity mix improved QoQ to 60.3% from 59.9% due to equity market bounce back in Q1FY26 (2) commission rationalization and (3) likely more flows in higher yielding older AuM. Strong equity performance in the 3-yr bucket is driving net flows’ market share of 15.0% in Q1FY26. Due to new ESOP scheme of 2.5mn shares, we raise staff cost for FY26/27E by 2%/4%. Although a bit volatile initially, equity markets have delivered strong returns in Q1FY26 while industry equity flows have improved to Rs314bn in Jun’25 from Rs272bn in Mar’25.

Outlook

Owing to strong MTM impact of 10.1% in Q1FY26 CLAuM and uptick in flows, we raise core EPS for FY26/27E by avg. 4.2%, increase multiple to 42x from 35x and raise TP to Rs5,700 from Rs4,600. Retain ‘BUY’.

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