Hold HDFC Asset Management Company; target of Rs 2783: ICICI Securities

ICICI Securities research report on HDFC Asset Management Company

HDFC AMC reported 22-quarter high EBITDA of INR 4.82bn in Q2FY24 driven by 29.6% end-to-end equity AUM growth in H1FY24. Improvement in fund performance is leading to superior business metrics such as gain in equity market share, unique investor share, and gain in flow market share in equity segment across channels. Higher AUM accretion from parent channel post-merger is an additional tailwind. However, we believe this is well captured in our target multiple of 30x FY25E P/E. Our earnings estimates have limited upside risk considering 12%/15% AUM growth in H2FY24E/FY25E and only 2.4bps drop in yields between FY23-25E, basis higher equity mix. The prospect of declining yields remains a risk due to telescopic pricing, fresh flows and other factors like regulation and competition.

Outlook

Our valuations are based on 30x FY25E core EPS of INR 81.3 (earlier: INR 75.3) and cash of INR 343 per share to arrive at a revised target price of INR 2,783.