Add Aditya Birla Sun Life AMC Ltd for the Target Rs 1,150 by Emkay Global Financial Services Ltd
ABSLAMC’s 2QFY27 performance was largely in-line, with revenue at Rs4.84bn growing ~5% sequentially; EBITDA came in at Rs2.68bn (+4% qoq), marginally lower than our estimate of Rs2.71bn. However, driven by better-than-expected investment income, PAT at Rs2.21bn (down 29% qoq) was above our/consensus’ estimate of Rs2.1/Rs2.19bn, respectively. ABSLAMC, in 2Q, saw healthy gross and net inflow among ‘focused funds’ driven by healthy performance, leading to such funds’ net inflow market share to be higher than the AUM market share. Management does not plan to drive incremental growth at the cost of margins; it targets maintaining margins while calibrating costs. To bake in the 2Q developments, we tweak our estimates which results in a ~3% increase in revenue (driven by higher yields); a 120-170bp increase in EBITDA margin leads to ~4-5% increase in PAT over FY28-29E. Our FY27 estimates are largely unchanged. We maintain ADD and Sep-27E TP of Rs1,150, implying FY28E PER of ~28x
Largely in-line operating performance
MF QAAUM at Rs4.42trn grew ~3% qoq and ~4% yoy, while revenue yields were broadly stable at 43.4bps; this led to revenue coming in at Rs4.84bn (+5% qoq), largely in-line with our estimate. Employee expenses at Rs1.26bn grew 9% qoq /~33% yoy, higher than our estimate of Rs1.22bn. The yoy increase in employee costs was driven by a provision reversal in the base, higher ESOP expenses, and headcount increase in the passive team. Other expenses at Rs0.74bn were flat qoq, better than our estimate of Rs0.76bn. EBITDA at Rs2.68bn grew ~4% qoq, marginally lower than our estimate of Rs2.71bn leading to EBITDA margin at 55.4% vs our estimate of 56%. Other income at Rs0.42bn was higher than our estimate, driving PAT of Rs2.21bn (down 29% qoq) beating our estimate of Rs2.1bn.
Flagship funds gain traction; Management remains committed to profitability
Flagship funds including Flexi Cap Fund, Balanced Advantage Fund, Multi-asset allocation fund, and small cap fund saw healthy inflows on both gross and net basis. However, the ELSS fund and the large-cap fund saw some outflows. Further, despite Balanced Advantage funds not seeing significant flows at the industry level, ABSLAMC’s Balanced Advantage fund has seen healthy flows, given the fund’s performance and re-allocation from weaker-performing funds. Management mentioned that the net flow market share remains higher than the AUM market share of flagship funds. Management also stated that it does not aim for incremental growth at the cost of profitability; instead, it will maintain margins on incremental assets while calibrating costs.
We maintain ADD on ABSLAMC with unchanged Sep-27E TP of Rs1,150
To bake in the 2Q developments, we tweak our estimates; this results in a ~3% increase in revenue driven by higher yields; this leads to a 120-170bps increase in EBITDA margin, driving a ~4-5% increase in PAT over FY28-29E. Our FY27 estimates are largely unchanged. We maintain ADD and Sep-27E TP of Rs1,150, implying FY28E PER of ~28x.
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