Buy Nippon AMC Ltd For Target Rs. 511 - Yes Securities
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Result Highlights
* Revenue – Management Fees was at Rs.3bn was lower than our estimates. Management fees were higher by 30% yoy but were flat on sequential basis.
* Yield on Management fees ‐ The Yield on Management fees was at 0.51%, which was a decline of 1bps YoY, and 2bps on qoq basis. Yields were lower than our forecasts especially considering that the share of equity in overall AUM has been higher on yoy basis.
* Operating Profit ‐Operating profit came at Rs.1.8bn which was in line with our estimates. Weaker than expected revenues were offset by 440bps yoy decline in other costs as % of revenues.
* Profits – PAT stood at Rs.1.8bn in line with our forecasts.
* Valuations ‐ The stock currently trades at FY23E P/E of 27x.
Our view:
We have cut our estimates by 6% for FY22E and FY23E each to factor in lower than expected yields during the quarter. However, we are enthused by the market share gains the company has seen in the past quarter and also by significant folio additions indicating regaining of brand strength in the lower tier markets. We expect a 17% PAT and 32% core PAT CAGR over FY21‐24E, for which we find the valuations of FY23E P/E of 28.4x attractive. Retain our BUY recommendation with a 1‐year price target of Rs511 (Rs452 earlier) based on 32x average FY23E and FY24E earnings (30x FY23E earnings earlier).
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