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One awaits expected improvement in equity business

Result Highlights

* Revenue: Revenue from operations at Rs 3,385mn was up 3.3%/26.1% QoQ/YoY, lagging the growth of QAAUM at 6%/32% QoQ/YoY

* Share of Equity in AUM: Share of Equity in AUM (including Hybrid funds) at 43% was flat QoQ but up 400 bps YoY (calculated on rounded off figures)

* Share of B-30 in AUM: Share of B-30 in AUM at 18% was down 40bps QoQ but flat YoY

* Channel mix: In overall AUM, the share of direct channel was 55%. Share of MFDs, Banks and NDs within distributed assets was 58%, 22% and 20%, respectively

* Operating profit margin: Operating profit margin for the quarter, at 62.7%, was up 372 bps QoQ and 793 bps YoY

Our view – One awaits expected improvement in equity business

Management reiterated that it expects improved inflows into equity schemes on the back of sharp improvement in performance in the last 6-9 months: There was a minor dip in equity market share on sequential basis. The other issue with equity business has been downward pressure on yield on account of new money coming at lower yield.

Management explained that NAM has been able to save on cost on the back of a variety of steps: Renegotiation of contracts, moving to smaller office premises, consolidating IT under IBM and focusing on online channel have all contributed to cost savings.

We maintain ‘BUY’ rating on NAM with a revised price target of Rs 435: We value NAM at 28x FY23 P/E for an FY21-24E EPS CAGR of 20%.

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