Emkay Global Financial's report on Nippon Life India Mutual Fund
NAM India reported ~7.1% yoy decline in MF AUM to Rs1,881bn, with ~28% yoy decline in revenues (revenue yields decline amid the change in portfolio mix). However, PAT rose ~24.6% yoy to Rs1.56bn, supported by one-off reversal income of Rs1.03bn (MTM gains on the company’s equity portfolio invested in own schemes). Going forward, although the quantum of outflows might subside, revenue yields are likely to be impacted by a change in portfolio mix toward rising share of liquid schemes over equity schemes, which in turn impacts profitability. However, we expect overall trends to improve in H2FY21 with the normalization of economy. Although we like the AMC business due to the limited credit risk attached, we remain concerned about the volatility in revenues/profitability in the near term. However, we remain confident of the company’s liquidity positioning during these volatile times due to its healthy AUM mix, timely support from banks and strong parentage.
We cut FY21/22 PAT estimates by ~3.5%/2.7% and roll forward valuation to Sept’22E. We maintain Hold with a revised TP of Rs280 (Rs271 earlier), corresponding to 29x P/Sept’22E EPS with 24% RoE by FY23E. We maintain EW stance in NBFC EAP.
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