Buy Nippon Life India Asset Management; target of Rs 615: Prabhudas Lilladher

Prabhudas Lilladher's research report on Nippon Life India Asset Management

NAM core income missed PLe by 4.6% driven by higher other opex and lower blended yields that fell by 1.4bps QoQ to 43.4bps. However, as per company sequential movement in AMC yields was normal. While share of small and mid-cap funds is higher for NAM vs HDFC AMC, company has been pushing sales of its large-cap fund which has been performing well. Share of largecap fund in net equity flows enhanced from 7.3% in Q1’24 to 35.3% in Q4’24. Equity performance within 1yr/3yr buckets remains one of the best-in-class which resulted in strong net flows’ market share of 12% in FY24 (vs 5.3% in FY23).

Outlook

Hence equity market share further expanded to 6.8% (+12bps QoQ). Over FY24-26E we expect a healthy core PAT CAGR of 17.8% (16.0% for HDFC AMC) led by higher than industry equity growth. Stock is trading at 29.4x on FY26E core EPS (15% discount to HDFC AMC). We slightly tweak multiple from 30x to 31x and marginally increase TP to Rs615 from Rs610. Retain BUY.