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Nippon AMC continued its strong show in Q4FY25. QAAUM grew by 29% YoY (down 2% QoQ) to Rs5.6tn. The market share in both, equity and overall basis increased, with Nippon maintaining its fourth position in the AMC industry. The management emphasised its strategy of strengthening its existing product offerings rather than pursuing new fund launches. The net flows market share in Equity and Hybrid segments continued to be in high single digits and high double digit (ex NFO). Other income was positively influenced by the repo rate cut. Operating expenses increased by 13% YoY whereas total revenue grew by 5% YoY. The management expects expenses to increase by 14-15% (ex-NFO). Both, PAT and core PAT beat our estimates. We have increased our QAAUM estimate by 5%/7% for FY26/FY27. Consequently, our PAT estimates have been increased by 3% each for FY26/FY27. The stock is trading at 25x FY27EPS. We have maintained the target multiple at 33x on FY27E EPS, i.e. +1SD from long-term mean. Baking in another strong quarter, we have revised our target price to Rs850 (vs Rs825 earlier). We maintain BUY.

Strong quarter

Nippon AMC’s revenue increased by 21% YoY to Rs5.7bn in Q4FY25 (8% ahead of estimate). Other income grew 50% QoQ to Rs230mn (vs estimate of a negative Rs185mn) owing to benefits of rate cut in debt investments. Core PAT grew by 9% YoY to Rs2.8bn (vs our estimate of Rs2.6bn). The management has guided for 14-15% increase in total costs (ex-ESOP) for FY26. PAT declined by 13% YoY to Rs3bn. We have increased our total income estimate by 6%/8%, but have also increased operating expense estimates by 10%/15% for FY26/FY27. Baking in a strong Q4 that beat our estimates, we have increased our PAT estimates by 3% each for FY26/FY27 to Rs14.6bn/Rs16.5bn.

AUM growth solid; market share gain continues

In Q4FY25, Nippon AMC’s QAAUM grew by 29% YoY (down 2% QoQ) to Rs5.6tn (7% ahead of our estimate). The equity segment grew by 31% YoY to Rs2.8tn, thereby comprising 49.8% of total AUM vs 49.2% in Q4FY24. At Rs1.3tn, the company's SIP AUM increased by 32% YoY. In Q4FY25, Nippon’s market share (QAAUM) grew by 29bps YoY (down 5bps QoQ) to 8.3%. The company’s equity QAAUM market share increased to 6.9%, up 10bps YoY (down 13bps QoQ). Baking in Q4FY25 print, we have increased our AUM estimates by 5%/7% for FY26/FY27 to Rs6.6tn/Rs7.7tn.

Yields decline; rationalization of commission paid to distributors continues

Revenue yield (calc.) on overall basis declined by 3bps YoY to 41bps in Q4FY25. Equity yield stood at 57bps, debt segment yield was at 25bps, liquid yield stood at 10-12bps and ETF yield at 15bps. The company has carried out rationalisation of distribution costs in the last two quarters and has repriced ~45-50% of its AUM as of March’25.

Maintain BUY; top pick

We expect a 13% net profit CAGR over FY25-FY27E, driven by 20% CAGR in MF QAAUM. The stock is now trading at 25x March'27E EPS and we continue to value it at an unchanged target multiple of 33x, i.e. +1SD from the long-term mean. The earnings revision results in a revised target of Rs850 (up from Rs825 previously). Maintain BUY. Nippon is a preferred pick in the AMC space. Key risks: Slowdown in AUM growth, equity net outflows, scheme under-performance and regulatory intervention in TER.

Valuation

Nippon AMC’s QAAUM grew by 29% YoY to Rs5.6tn in Q4FY25. The market share in both, equity and overall basis increased, with Nippon maintaining its fourth position in the AMC industry. We have increased our QAAUM estimate by 5%/7% for FY26/FY27. Consequently, our PAT estimates have been increased by 3% each for FY26/FY27. The stock is now trading at 25x March'27E EPS and we continue to value it at an unchanged target multiple of 33x, i.e. +1SD from the long-term mean. The earnings revision results in a revised target of Rs850 (up from Rs825 previously). We maintain BUY. It is our top pick. Risks: Lower AUM growth and decline in scheme performance.

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