Buy Nippon Life India Asset Management; target of Rs 700: Prabhudas Lilladher

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

NAM saw a mixed quarter since revenue miss was offset by lower other opex. Blended yields declined by 1.7bps QoQ, which was attributable to telescopic pricing driven by strong equity market growth. Core income at Rs3.08bn was largely in-line. Staff cost (ex-ESOP) was a miss and rose by +11% QoQ due to higher increment, variable pay, headcount addition and spends on employee engagement. Led by class leading equity performance, net flow market share that increased from 5.3% in FY23 to 12% in FY24, is sustaining well.

Outlook

Hence, equity market share further expanded to 6.9% (+15bps QoQ). We raise core EPS for FY25E/FY26E by ~10% each due to upgrade in FY25E closing equity AuM for the industry from 13% to 28%. We expect a healthy core PAT CAGR of 24.6% (earlier 18.8%). Stock is trading at 29x on FY26E core EPS (17% discount to HDFC AMC). We slightly tweak multiple to 33x from 31x and increase TP to Rs700 from Rs615. Retain BUY.

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