Accumulate Aditya Birla Sun Life AMC Ltd for Target Rs 1,100 by Elara Capital
Early signs of flow recovery, at a higher cost
Aditya Birla Sun Life AMC ’s (ABSLAMC IN) Q2FY27 revenue was INR 4,838mn, up 4.5% QoQ and in line with our estimate. MF QAAUM rose 3.3% QoQ to INR 4,418bn, with equity up 5.3% to INR 2,092bn (3% above our estimate) . Debt fell 5.2% and liquid rose 16.8%, lifting the equity mix to 47.4% from 46.5% and the MF yield to 43.8bps (Q1FY27: 43.3bps) with segment yields unchanged. Overall QAAUM rose 76% QoQ to INR 11,056bn on a full quarter of the EPFO/ESIC mandate (INR 6,528bn). Costs came above expectations : opex rose 5.1% QoQ to INR 2,158mn, 12% above our estimate, as employee cost climbed 8.5% QoQ to INR 1,263mn on higher headcount and ESOP costs . Operating profit grew 4.0% QoQ to INR 2,681mn, 8.4% below our estimate, with margin flat at 55.4% versus our 60.3%. PAT fell 28.6% QoQ to INR 2,210mn (8.5% below) as other income normalized to INR 424mn due to weaker markets . NOPLAT rose 1.9% QoQ to INR 1,902mn . Retain Accumulate with a revised TP of INR 1,100 (from INR 1,175).
Mix helps yields; share still slipping:
ABSLAMC’s QAAUM rose 3.3% QoQ against industry’s 4.9%. So, MF share slipped another 7bps to 5.07% sequentially . Active equity share eased 4bps to 3.92%, slower than the 10bps fall in Q1FY27 . Debt share fell 31bps to 11.3% on institutional outflows , while liquid rose 59bps to 9.45%. Closing MF AUM ended ~1% lower YoY after the September correction, a softer base for Q3FY27.
Focus funds gaining; SIP registrations rebound: Flexi Cap QAAUM rose 9.5% QoQ to INR 282bn, Small Cap 13.8%, Multi Asset 11.6% and Balanced Advantage 7.4%, all well ahead of the 5.3% equity QAAUM growth, pointing to net inflows rather than MTM . M anagement cited ~4.5 -4.8% net -flow share in flexi cap against ~3 -3.5% AUM share. Management highlighted 20-25% of investments redemption are reinvested in its own scheme vs . ~ 5% earlier . Monthly SIP contribution was flat at INR 10.94bn and SIP share slipped to 3.37% from 3.41%, but new registrations jumped to ~ 0.7mn from ~ 0.55mn and contributing accounts to 4.17mn from 4.03mn, the first clear pick -up after two soft quarters.
Mandates inflate AUM, not earnings; opex is the swing factor:
The EPFO/ESIC mandate is cost -neutral and contributes no profit . Alternates were 7.4% of gross revenue (Q1FY27: 7.1%) and 4.3% of net. ESOP charges of ~INR 550 -600mn per annum from existing schemes plus ~INR 140 -150mn from the scheme approved this week imply ~INR 175 -190mn per quarter through FY28E. We believe higher opex is likely to drag profitability in the near term.
Retain Accumulate with a pared TP of INR 1,100: We cut FY27E/28E/29E revenue by 4.5%/8.0%/8.2%, NOPLAT by 7.3%/10.4%/9.3% and APAT by 12.1%/8.5%/7.8% on a softer MF AAUM trajectory after the Sep -26 correction, a higher ESOP -led cost base and lower treasury income. We now build in MF AAUM/revenue/NOPLAT CAGRs of 13.4%/12.4%/11.3% in FY26 - 29E (earlier: 16%/14%/15%). Our DCF -TP is now revised to INR 1,100, implying ~32x FY28E NOPLAT and 16% upside. Converting better fund performance and wider bank empanelment into net -flow and SIP share remain the re -rating trigger s. Q2 offers early evidence, at a higher cost . RISKS are a prolonged equity correction, further share erosion and yield compression.
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