Add HDFC Asset Management Ltd For Target Rs.5,050 By Yes Securities Ltd
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Ability to rationalize commissions a positive
Our view – Commission rationalisation aids revenue yield improvement
Revenue Yield - Revenue yield evolved positively on sequential basis: HDFC AMC has rationalised the commissions paid to distributors on 12-13 equity schemes on 1st August 2024. This had a positive impact on revenue yield in 2Q and some more benefits are expected to flow in 3Q. The share of Equity QAAUM in total QAAUM has also improved. These factors have led to a 1bp QoQ improvement in revenue yield in 2Q.
Operating Expenses – Operating expenses growth largely contained: The employee cost for 2Q was down -5.1% QoQ, driven lower due to absence of employee engagement expense. The other operating cost for 2Q has increased by 28.2% YoY, driven largely by incremental CSR related expense and higher KYC expense on account of higher unique customer addition.
We maintain ‘ADD’ rating on HDFCAMC with a revised price target of Rs 5050: We value HDFCAMC at 44x FY26 P/E, with the implied P/B being 12.9x.
Other Highlights (See “Our View” above for elaboration and insight)
* Revenue: Revenue from operations at Rs 8,872mn was up 14.4%/38.0% QoQ/YoY, leading/lagging the growth in QAAUM of 13.0%/44.6% QoQ/YoY
* Share of Equity in AUM: Share of Equity in AUM (including Hybrid funds) at 65.7% was up 140 bps QoQ and 810 bps YoY
* Share of B-30 in AUM: Share of B-30 in AUM at 19.5% was up 10 bps QoQ and 130 bps YoY
* Channel mix: Share of Banks, MFDs, NDs and Direct channel was 13.3%, 35.1%, 25% and 26.6%, respectively in Equity QAAUM
* Operating profit margin: Operating profit margin for the quarter, at 79.4%, was up 261 bps QoQ and 437 bps YoY
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