Add HDFC AMC Ltd For Target Rs. 3,283 - Yes Securities
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Result Highlights
* Revenue – Management Fees was at Rs.5bn was in line with our estimates. Management fees were higher by 23% yoy and witnessed a growth of 1% on sequential basis.
* Yield on Management fees ‐ The Yield on Management fees was at 0.49%, which was a increase of 3bps YoY, in line with our estimates. Improvement in yield was led by favorable product mix (higher share of equity).
* Operating Profit ‐ Operating profit came at Rs.3.8bn which was lower than our estimates of Rs.4.1bn due to higher than expected employee cost led by ESOP costs of Rs176mn for the quarter.
* Profits – PAT stood at Rs.3.5bn v/s our estimates of Rs.3.3bn led by higher than forecasted other income (Rs1,009mn vs estimate of Rs506mn).
* Valuations ‐ The stock currently trades at FY23E P/E of 34.6x.
Our view:
We are cutting our estimates for HDFC AMC on the back of weaker than expected AUM performance YTD and lower yields. Sustained market share loss needs to be corrected for which the fund performance has started improving and the company is launching new products. We value the company at 38x average EPS of FY23E and FY24E to arrive at a fair value of Rs3,283 (Rs3,245 earlier). We have raised our valuation multiple given that the industry is now heading into a strong growth phase. Retain our ADD rating.
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