Reduce Prudent Corporate Advisory Services; target of Rs 2665: ICICI Securities

ICICI Securities recommended reduce rating on Prudent Corporate Advisory Services with a target price of Rs 2665 in its research report dated November 04, 2024.

Broker Research

November 05, 2024 / 11:27 IST

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ICICI Securities research report on Prudent Corporate Advisory Services

Prudent Corporate Advisory Services (Prudent) has progressed well in terms of AUM growth aided by MTM, traction in SIP and growth in MFDs. AUM/SIP book/MFD count clocked CAGRs of 31%/28%/21% between FY19–24 and grew by 11.6%/12.1%/4% on a QoQ basis in Q2FY25. Despite consolidation of yields, post removal of the B-30 incentive, upgrade in earnings estimates is driven by higher-than-expected AUM growth and superior execution (Insurance revenue has also grown 45% in H1FY25). Possible upside risks emanate from continued traction in SIP (45% of client base is yet to have a SIP scheme) and spike in insurance cross-sales. Higher mix of equity within AUM (96.7%) lends higher growth potential for Prudent compared to AMCs. Any MTM fall in AUM, increase in regular mix and cuts in commissions (both AMC and insurance) are additional risks. Downgrade to REDUCE.

Outlook

We downgrade Prudent to REDUCE post a 35% rally in the last 3 months. We revise our target price to INR 2,665 (earlier INR 2,576) on earnings multiple of 35x (unchanged) on FY26E adjusted EPS INR 76.1 (earlier INR 70), after adding back goodwill amortisation of INR 150mn.

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