Buy UTI Asset Management Company; target of Rs 770: HDFC Securities

HDFC Securities is bullish on UTI Asset Management Company has recommended buy rating on the stock with a target price of Rs 770 in its research report dated April 27, 2023.

Broker Research

April 29, 2023 / 10:24 IST

Buy

26 Aug, 2025 12:21

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HDFC Securities' research report on UTI Asset Management Company

UTIAM reported yet another weak quarter across most operational parameters, with 5/28% sequentially lower revenue/core operating profits, owing to sharp compression in equity yields (-5bps QoQ), elevated admin expenses (+28% QoQ), and loss in equity market share (-19bps QoQ). UTIAM’s equity yield trend was on similar lines as QoQ deterioration was reported by HDFCAMC and NAM. Amongst the listed AMCs, UTIAM has the maximum levers to improve core profitability; however, near-term execution has been disappointing and poses a tall ask. We flag sustained medium-term pressure on core yields and staff costs and consequently cut our earnings estimates for FY24E/25E by 17.9%/16.5% to factor in lower equity yields and higher opex.

Outlook

We expect UTIAM to deliver 6%/12% revenue/operating profit CAGR over FY23- 25E on the back of healthy AUM growth and marginal cost rationalisation. Given its attractive valuation, we maintain BUY, with a lower TP of INR770 (15x Mar-25E NOPLAT + Mar-24E cash and investments less 15% execution discount; rolling forward adjustment to multiple from 19.5x to 15x and regulatory uncertainty).

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