Add UTI Asset Management Ltd for the Target Rs 1,200 by Emkay Global Financial Services Ltd
UTIAM delivered a steady performance during the quarter, with MF QAAUM increasing ~1% sequentially to Rs3.93trn, while revenue at Rs3.8bn (+1% qoq) was largely in line with our estimate. Employee costs and other opex improved sequentially, driving EBITDA growth of ~21% qoq to Rs1.8bn, higher than our estimate. Driven by strong other income, PAT at Rs2.9bn grew 16% yoy and was ahead of our estimate of Rs2.1bn. With the implementation of BER, the company fully passed on the impact to distributors, resulting in no material impact on the yield. The management remains focused on improving flow market share above its AUM market share in the equity segment. To bake in the 1Q developments, we cut our revenue estimates by ~2-3% over FY27-29E, while we cut EBITDA estimates by ~1-5% over FY27-29E. We maintain ADD and Jun-27E TP of Rs1,200, implying FY28E PER of 18x.
Yields largely stable, costs improve
MF QAAUM at Rs3.93trn increased ~1% sequentially, while yields at 38.7bps were broadly stable and in line with our estimate, resulting in largely in-line revenue at Rs3.8bn (+1% qoq). Employee costs at Rs1.2bn declined 8% qoq and were lower than our estimate of Rs1.3bn. Other expenses at Rs0.8bn declined 17% qoq, driving EBITDA at Rs1.8bn (+21% qoq), better than our estimate of Rs1.5bn. EBITDA margin at 46.9% improved sequentially from 39.3% in 4QFY26 and was higher than our estimate of 40.3%.PAT at Rs2.9bn increased significantly, driven by better-than-expected other income, and was higher than our estimate of Rs2.1bn.
Focus remains on increasing market share
MF QAAUM market share at 4.72% declined 4bps sequentially, driven by redemption pressure and weak performance in a few large schemes. With some enhancements in process and people in the investment team, the management expects the market share slippage trend to reverse as performance improves. The management remains focused on increasing its flow market share above its AUM market share in the equity segment. Further, the company is taking initiatives to improve SIP flows. The PMS business saw a sharp dip in AUM sequentially on account of a revised mandate from the EPFO; however, the management expects only a marginal impact on its fee. The company has a strong pipeline of product launches: passive products include the UTI Nifty 500 ETF, Index Fund, and UTI BSE Index Sector ETF, while active launches include Balanced Hybrid Fund and some sectoral funds. Further, SIF and GIFT City outbound funds are expected to launch in 2HFY27.
We maintain ADD and Jun-27E TP of Rs1,200
To bake in the 1Q developments, we tweak our estimates, which results in ~2-3% cut in revenue over FY27-29E, leading to ~1-5% cut in EBITDA. Our PAT increases by~2-11%, owing to higher other income and exclusion of profit attributable to NCI. Going forward, improvement in fund performance remains key to driving market share and higher revenue, supporting an uptick in the share price. We maintain ADD and Jun-27E TP of Rs1,200, implying FY28E PER of ~18x.
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