Add Aditya Birla Sun Life AMC Ltd For Target Rs.490 - Yes Securities
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Revenue yield inches up due to mix change
Result Highlights
* Revenue: Revenue from operations at Rs 3,111mn was up/down 2.2%/-6.3% QoQ/YoY, higher than the sequential QAAUM growth of 0.4% QoQ
* Share of Equity in AUM: Share of Equity in AUM (including Hybrid funds) at 43% was up 61 bps QoQ and 353 bps YoY (calculated on rounded off figures)
* Share of B-30 in AUM: Share of B-30 in AUM at 16.3% was up 40 bps QoQ and 44 bps YoY
* Channel mix: Share of MFDs, Banks, NDs and Direct was 32%, 8%, 17% and 43%, respectively in overall AUM (Ex-ETF)
* Operating profit margin: Operating profit margin for the quarter, at 58.6%, was down -104 bps QoQ and -176 bps YoY
Our view – Revenue yield inches up due to mix change
Calculated revenue yield inched up 1 bps QoQ on the back of mix change in favour of equity segment:
While the mix within debt has slightly improved, debt AUM yield is largely flattish. Within the debt business, the company is trying to build long-duration assets, which will have higher yield. On the equity side, discipline is being maintained in terms of payout (presumably to distributors) and there can be a marginal improvement in margin (presumably in the near term). Over the long-term, negative factors such TER slab aspects, shift to passive assets and replacement of legacy assets will continue.
Equity fund performance has improved, which has led to improved flows in smallcap, midcap and multicap funds:
After sluggish growth in recent years, debt AUM growth is expected to do better over the next 3 years, as per management. As portfolio yield improves, the comparison with bank deposit products will become more favourable. While there are issues with institutional debt, where there are outflows, retail and HNI investors are expected to participate in debt mutual funds
We maintain ‘ADD’ rating on ABSL AMC (ABSL) with a revised price target of Rs 490:
We value ABSL at 19x FY24 P/E for an FY22-25E EPS CAGR of 7.6%.
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