IGI Logo

ABSL AMC posted a strong quarter with its core PAT beating our estimate. Revenue grew by 17% YoY to Rs4.3bn with blended yield of 45bps. ABSL AMC’s market share continued to decline on both overall and equity QAAUM, although the pace of decline softened. Overall QAAUM grew by 15% YoY, which was in line with our estimate, with equity QAAUM growing by 11% YoY. We have made minor changes to our AUM. In Q4FY25, the company started a debt-oriented ESIC mandate under PMS with an AUM of Rs75bn. Also, the   company expects to grow its direct sales team from 80 to ~100 employees. However, we have increase our PAT/core PAT estimates by 8%/7% for FY26/FY27. The stock is currently trading at 17x and we continue to value the company at an unchanged 19x, leading to a revised target price of Rs720 (vs Rs675). Maintain ADD.

PAT beats estimates: Revenue grew by 17% YoY to Rs4.3bn. Benefiting from the rate cut, other income grew by 87% QoQ to Rs720mn. Total income grew by 14% YoY (4% QoQ) to Rs5.0bn (34% ahead of our estimate). Yield in the Equity segment stood at 68-69bps while for Debt it was stable at 24-25bps; for Liquid it was at 12-13bps. The blended yield (calc.) was strong at 45bps. Operating expenses increased by 15% YoY with other expenses increasing by 11% YoY. Net profit rose by 9% YoY to Rs2.3bn. Core PAT was up 16% YoY (16% ahead of our estimate). PAT grew 19% YoY to Rs9.3bn (vs our estimate of Rs8.6bn). After a robust Q4FY25, we have raised our net profit projections for FY26/FY27 by 8%/7% while maintaining a higher-than-expected increase in operating expenses. Dividend payout ratio was 75% for FY25.

AUM in line with estimate: ABSL AMC posted a 15% YoY growth in QAAUM in Q4FY25 to Rs3.8tn (in line with our estimate). Equity made up 44% of this total and increased at a slower pace of 11% YoY to Rs1.7tn. ABSL AMC’s monthly SIP book grew by 5% YoY (down 5% QoQ) to Rs13.2bn (vs. industry growth of 34%). It closed Q4 with a total of 4.2mn SIP accounts and AUM of Rs756bn (+9% YoY), but declined 3% QoQ owing to equity market movement. 0.54mn new SIPs (including STP) were registered in Q4. We have marginally increased our AUM estimates and it would clock 10% CAGR over FY25-FY27 to Rs4.5tn.

Market share loss continues: In Q4FY25, ABSL AMC's equity market share dropped 67bps YoY (down 12bps QoQ) to 4.23% and its overall QAAUM market share decreased 60bps YoY (+6bps QoQ) to 6.30%. The management is confident of arresting market share loss through better scheme performance and higher flows. ABSL AMC’s market share loss is a key concern, though the decline in market share has abated.

Distribution trends stable: Direct channel accounted for 43% share, MFDs 32% on overall AUM basis. In terms of equity asset distribution, MFDs maintained the lion’s share at 54% followed by national distributors at 20%. Direct channel constituted 17%. The company continues to focus on building up its digital channel capabilities.

Maintain ADD: ABSL AMC posted a healthy Q4FY25, but the market share bleed continues. We continue to value the company at an unchanged 19x – long term mean. Baking in the revised net profit estimates, we have arrived at a revised target of Rs720 (vs Rs675 earlier). Maintain ADD. We await sustainable growth and market share gains. Key risks: Slowdown in AUM growth, market share loss and competitive headwinds.

Valuation

ABSL AMC had a healthy quarter but market share bleed continued. We have marginally increased our AUM estimates. However, we have increased our PAT/core PAT estimates by 8%/7% for FY26/FY27. We continue to value the company at an unchanged 19x – long term mean. Baking in the revised net profit estimates, we have arrived at a revised target of Rs720 (vs Rs675 earlier). Maintain ADD. Upside triggers: Market share gains and scheme performance.

For More Centrum Broking Disclaimer https://www.centrumbroking.com/disclaimer/

SEBI Registration No.:- INZ000205331