Hold HDFC Asset Management Company Ltd For Target Rs.3000 - 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 an AUM of ~| 4.4 lakh crore as on September 2021.
* Market share as on Q2FY22 was at 11.9%
* Strong distribution network with 227 branches and over 70,000 empanelled distribution partners
Q2FY22 Results: HDFC AMC reported a mixed quarter.
* AUM up 23% YoY, 4.1% QoQ to | 4.35 lakh crore, equity AUM up 7.7% QoQ
* Revenue from operations up 6.9% QoQ to | 542 crore; yields up 2 bps QoQ
* PAT remained flat QoQ (1.9% YoY) to | 344 crore, primarily led by lower other income at | 66 crore
What should investors do? HDFC AMC’s share price has grown over 70% since its listing in August 2018.
* We maintain HOLD rating on the stock
Target Price and Valuation: Given concerns on declining market share, we value HDFC AMC at ~38.6x FY23 EPS and revise our target price from | 3150 to | 3000
Key triggers for future price performance:
* Strong brand franchise, distribution strength and operational capabilities
* Continued decline in market share is a concern; 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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