Hold Nippon Life India Asset Management; target of Rs 305: Sharekhan

Sharekhan's research report on Nippon Life India Asset Management

The stock has corrected 43% from the highs of Rs. 477 and trades at 21.1x and 19x its FY2023E and FY2024E P/E, respectively. Although management had reiterated for leaner operating expenses, we believe this would not suffice in limiting compression on yields. It has witnessed compression in yields on a yearly basis despite increased equity AUM. Opex to AAUM remains elevated at 19 bps in FY2022, higher than its peers. Management had reiterated headroom for further improvement, which we believe is limited. With its theme of ‘sustainably forward’ in its annual report for 2022, Nippon India Life Asset Management aspires to grow through a nimble and secure digital ecosystem with an objective approach to sustainable investing in the long term.

Outlook

We downgrade our rating on Nippon Life India Asset Management to Hold from Buy with a revised PT of Rs. 305. We see headwinds in terms of yields compression and intense competition going ahead in the medium term.