Hold HDFC AMC Ltd For Target Rs. 3,150 - ICICI Direct
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Steady performance; market share to be watched…
About the stock: HDFC AMC is among the largest and profitable mutual funds with a AUM of | 4.18 lakh crore as on June 2021.
* Market share as on Q1FY22 was at 12.4%
* Strong distribution network with 227 branches and over 70,000 empanelled distribution partners
Q1FY22 Results: HDFC AMC reported a soft quarter.
* AUM up 17% YoY, 5.9% QoQ to | 4.18 lakh crore, equity AUM up 9% QoQ
* Revenue from operations flat QoQ at | 507 crore; yields down 3 bps QoQ
* PAT up 9% QoQ (14.3% YoY) to | 345 crore, primarily led by higher one-off other income at | 101 crore
What should investors do? HDFC AMC share price has grown over 70% since its listing in August 2018.
* We maintain HOLD rating on the stock
Target Price and Valuation: We value HDFC AMC at ~43x FY23 EPS to arrive at a target price of | 3150 per share.
Key triggers for future price performance:
* Strong brand franchise, distribution strength and operational capabilities
* Continued decline in market share is concerning; new product launches to aid AUM growth
* Competitive pressure & passive products to limit yield expansion
* Premium valuations to continue amid AUM growth & superior operational efficiency
Alternate Stock Idea: Apart from HDFC AMC, in our coverage we like MCX.
* MCX is a leader in commodity derivative exchanges in India with over 96% market share in commodities future space as on FY21
* BUY with target price of | 2000
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