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Result Highlights

* Revenue – Management Fees was at Rs.3bn was higher than our estimates of Rs.2.9bn. Management fees increased by 10% yoy and witnessed a growth of 12% on sequential basis.

* Yield on Management fees ‐ The Yield on Management fees was at 0.53%, which was a fall of 1bp YoY, against our estimate of 0.51%.  

* Operating Profit ‐Operating profit came at Rs.1.66bn which was in line with our estimates of Rs.1.6bn due to higher than expected operating cost.   

* Profits – PAT stood at Rs.1.7bn v/s our estimates of Rs.1.98bn led by sharply lower other income on qoq basis.  

* Valuations ‐ The stock currently trades at FY23E P/E of 24x.  

* Dividend: The Board has recommended a final dividend of Rs5 per share

Our view:

Nippon India AMC delivered better than expected performance on most operating parameters. Given our house view of a significant rally in Indian equity markets in the near term, we expect AUM growth of the industry to remain strong.  This shift of product mix towards higher share of equity AUM shall lead to better profitability as yields on Equity AUM is 2x of the overall yields.

NAM has demonstrated improvement in cost efficiencies, which will further boost profitability as operating leverage kicks in. Market share recovery is also expected with recent improvement in fund performance. We have raised our estimates by 8% and 6% respectively for FY22E and FY23E respectively driven by better than forecasted AUM performance in Feb and March. Retain our BUY rating with a revised price target of Rs452 (earlier Rs426).

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