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Both equity and debt yield inch lower

Result Highlights

* Revenue: Revenue from operations at Rs 3,045mn was down/up -5.9%/0.4% QoQ/YoY, lagging the QAAUM degrowth/growth of -4.8%/2.0% QoQ/YoY

* Share of Equity in AUM: Share of Equity in AUM (including Hybrid funds) at 42% was up 57 bps QoQ and 426 bps YoY (calculated on rounded off figures)

* Share of B-30 in AUM: Share of B-30 in AUM at 16% was down -3 bps QoQ but up 10 bps YoY

* Channel mix: Share of MFDs, Banks, NDs and Direct was 31%, 10%, 15% and 44%, respectively in overall AUM (Ex-ETF)

* Operating profit margin: Operating profit margin for the quarter, at 59.6%, was down -93 bps QoQ and -78 bps YoY

Our view – Both equity and debt yield inch lower

Calculated operating revenue to AUM (yield) inched marginally lower both on QoQ and YoY to 43bps: ABSL AMC is having its highest ever Equity (including Hybrid) share of 42% in MF AUM. However, the revenue yields have move down due to fresh equity inflows coming in at lower yields and internal movement within the debt segment from relatively higher yielding AUM to relatively lower yielding AUM.

Total Operating expenses moved up 2.4% YoY and declined -3.7% QoQ: The employee expenses in 1QFY23 was down -6.3% YoY to Rs 647 mn. However, other operating expenses moved up by 20% YoY to Rs 539 mn. The increase was due to normalization of business activities which has led to higher travel cost and cost related to investor awareness events. The management has guided than it would continue to spend on brand building and events, hence the current cost is at normalized level and sustainable going forward.

We maintain ‘BUY’ rating on ABSL AMC (ABSL) with a revised price target of Rs 520: We value ABSL at 19x FY24 P/E for an FY22-25E EPS CAGR of 10.8%.

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