Buy Reliance Nippon Life Asset; target of Rs 330: JM Financial

JM Financial's research report on Reliance Nippon Life Asset

RNAM reported a strong quarter with PAT for 4QFY18 up 35% YoY at INR 162bn. Quarterly average AUM in equity MF schemes witnessed strong growth (+53% YoY). However, overall quarterly average MF AUM grew 16%, as debt MF schemes faced pressure from rising interest rates. Equity MF schemes now contribute 37% of RNAM’s overall MF AUM (on a closing basis), up from 30% as of FY17.RNAM’s profitability witnessed a sharp uptick in 4QFY18, with PAT / QAAUM at 26bps for the quarter and 24bps for the full year FY18.

Outlook

We believe the resultant compression on net revenue yields will to a large extent be offset by the strong growth in other income from PMS/ AIF/ offshore businesses which are shaping up well. We factor in a 2% / 5% earnings cut for FY19E/FY20E and value RNAM at 28x FY20E EPS to arrive at our revised 12-month TP of INR 330/sh. For all recommendations report, click here

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