Buy Hdfc Asset Management Company Ltd for the Target Rs 3,000 by Emkay Global Financial Services Ltd
HDFCAMC reported a healthy performance, with MF QAAUM growing ~4% qoq to Rs9.69trn and market share largely stable at 11.1%. Yields increased to 47.9bps (+0.7bps qoq) during the quarter, led by a shift in mix toward equity. As a result, revenue at Rs11.7bn (Emkay est: Rs11.3bn) grew ~6% sequentially, driven by steady AUM growth and healthy yields. EBITDA margin improved by 210bps qoq to 79.5% and was higher than our estimate of 78.4%. PAT at Rs7.49bn (down ~11% qoq) came in better than our estimate of Rs6.82bn. Going forward, the management continues to focus on scaling the alternates business and remains committed to cost discipline but will not shy away from making investments. To bake in the 2Q developments, we tweak our estimates, resulting in ~1-2% increase in PAT over FY27-29E. Led by its brand equity, distribution, and strong retail franchise, HDFCAMC is well poised to drive AUM growth. We maintain BUY with an unchanged Sep-27E TP of Rs3,000, implying FY28E PER of 35x.
Healthy performance driven by yield improvement
HDFC AMC’s MF QAAUM grew ~4% sequentially to Rs9.69trn, while maintaining market share at 11.1%. Yields improved to 47.9bps in 2Q from 47.2bps in 1Q, led by a change in asset mix, resulting in revenue of Rs11.7bn (+6% qoq), beating our estimate by ~3%. Employee costs declined ~1% qoq to Rs1.4bn, while other expenses declined 8% qoq owing to higher CSR expenses in 1Q. EBITDA margin improved by 210bps qoq to 79.5% and was higher than our estimate of 78.4%. Resultantly, EBITDA at Rs9.3bn increased 9% sequentially and was ~5% higher than our estimates. PAT at Rs7.49bn declined ~11% qoq but was ~10% higher than our estimates, led by higher-than-expected other income and EBITDA.
Focus remains on maintaining cost discipline; alternates to scale up
The management mentioned that the company will continue to focus on maintaining cost discipline. While certain business-related expenses would continue to grow with inflation, it would also make investments for future growth. The management mentioned that it would not shy away from making investments to drive the business. Investments span the alternates business (AIF + PMS), with ~20+ investment professionals, international businesses, digital technology, AI-led capabilities, and a larger MF investment team (up from ~30 to ~40), in preparation for AUM growth over time. With the recent launch of AIF products, the management believes HDFCAMC has a full stack of investment solutions and remains focused on scaling the alternates business.
We maintain BUY with an unchanged Sep-27E TP of Rs3,000
To bake in the 2Q developments, we tweak our estimates, resulting in 1-2% increase in revenue over FY27-29E driving ~1-2% increase in PAT over the same period. Backed by its strong brand equity, extensive distribution network, and robust retail franchise, HDFCAMC is well positioned to sustain healthy AUM growth. We maintain BUY with an unchanged Sep-27E TP of Rs3,000, implying a FY28E PER of 35x.
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