Add Aditya Birla Sun Life AMC Ltd for the Target 1,200 by Emkay Global Financial Services Ltd
ABSLAMC delivered a modest performance during 1QFY27, with QAAUM at Rs4.28trn (-2% qoq) coming ~1% below our estimates, while improved yields drove largely in-line revenue. However, employee costs at Rs1.16bn were elevated owing to ESOP costs, resulting in an EBITDA margin of 55.6% (-2.5ppt qoq) against our estimate of 56.6%. Core PAT at Rs1.86bn declined 14% sequentially but was ~1% above our estimate, owing to a lower tax rate. Strong other income at Rs1.62bn led to PAT of Rs3.1bn (+65% qoq). The improvement in yields was driven by the implementation of BER and optimization of commissions and other expenses. Going forward, the management remains committed to its “focus” funds strategy, while planning to launch multiple products across the Alternate and Offshore category. To bake in the 1Q developments, we cut our revenue estimates by ~1% over FY28-29 and EBITDA margin by 150-170bps, resulting in a ~2-3% cut in PAT over FY27-29E. We cut our Jun-27E TP by ~4% to Rs1,200 (Rs1,250 earlier), implying an FY28E PER of ~29x.
Improvement in yields and elevated cost drive in-line performance
ABSLAMC’s MF QAAUM at Rs4.28trn increased 6% yoy but declined 2% sequentially, resulting in a ~20bps qoq contraction in market share to 5.1%. Revenue yields at 43.4bps improved 0.8bps qoq, driven by the implementation of BER and optimization of commissions and other expenses. As a result, revenue at Rs4.63bn (+1% qoq) was largely in line with our estimate. Employee costs at Rs1.16bn increased 11% qoq owing to higher ESOP expenses, missing our estimate of Rs1.1bn. Consequently, EBITDA margin at 55.6% dipped 250bps sequentially and was lower than our estimate of 56.6%, resulting in EBITDA of 2.58bn (-3% qoq) vs our estimate of Rs2.61bn. Other income at Rs1.62bn increased significantly, which, coupled with a lower tax rate, led to PAT of Rs3.1bn (+65% qoq) vs our estimate of Rs1.85bn. Core PAT at Rs1.86bn declined 14% sequentially (owing to a low tax rate in 4Q) and was 1% above our estimate
Strategic commitment to “focus” funds; multiple new products in the pipeline
The company is increasing its distribution efforts around “focus” equity and hybrid strategies, including Flexi Cap, Balanced Advantage, Multi Asset, and Small Cap, where the management expects healthy flows over the medium term. To drive further growth, the management remains focused on launching new products in the Alternate and Offshore segments. Near-term launches and ongoing fundraises span AIFs (including the Structured Opportunity Fund 2 and Real Estate Credit Series II) and offshore inbound and outbound funds via the newly licensed GIFT City branch. The management plans to scale the SIF Hybrid Long-Short strategies over the next six months, as the fund establishes a performance track record.
We maintain ADD and cut our Jun-27E TP to Rs1,200
To bake in the 1Q developments, we tweak our estimates, resulting in a slight cut in AUM while yields are broadly stable, leading to a ~1% cut in revenue over FY28-29E. We cut EBITDA margin by 150-170bps resulting in a ~2-3% cut in PAT over FY27-29E. We maintain ADD and revise down our Jun-27E TP to Rs1,200 (from Rs1,250 earlier), implying FY28E PER of ~29x.
For More Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354
