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Soft  quarter; core income miss due to lower revenue

* New TER guidelines may not have a material impact

* Net equity flow remain strong driving market share gains

HDFCAMC saw a soft quarter as core income at INR 8.4bn was 2.3% lower to PLe due to miss on revenue. Management attributed this to lesser days in Q4FY26 (90 days) vs Q3FY26 (92 days). Company suggested that GST impact as per new TER directives may be 3-4 bps which could be passed to distributors. Led by strong equity performance in 3-yr bucket, market share in net flows remains 2nd highest; it was 15% in FY26. Hence stock equity market share increased by 6bps QoQ to 13% in Q4FY26. HDFCAMC could better navigate impact of new TER guidelines due to its pedigree; we have factored a decline of 1bp each in equity yields over FY26-28E. We tweak multiple to 36x on Mar’28 core EPS but maintain TP at INR 3,000. Retain ‘BUY’.

Soft quarter; miss on core income due to lower revenue: Equity QAAuM (incl. bal) came in as expected at INR 5.70trn; it was flat QoQ. Revenue was a miss at INR 10.5bn (PLe INR  10.67bn) led by lower yield at 45.3bps (PLe 46bps). Opex was stable at INR 2.3bn (PLe INR 2.3bn); increase in other opex was offset by tad lower staff cost. Staff cost was stable at INR 1.3bn (PLe INR 1.3bn), other opex was higher at INR 1026mn (PLe INR 982mn). Hence, core income was a miss at INR 8.2bn (PLe INR 8.4bn) resulting in operating yield of 35.5bps (PLe 36.3bps). Other income was INR 0.1bn (PLe INR 0.2bn). Tax rate was 25.3% (PLe 24%) in Q4'26. Hence, core PAT was 4% below PLe at INR 6.1bn, core PAT yield was 26.5bps (PLe 27.6bps).

Net equity flow market share remains higher than stock: MF yield declined by 1.3bps QoQ; as per the management this was due to lesser days (90) in Q4FY26 vs Q3FY26 (92 days). Share of equity/debt segment fell by 22/117 bps QoQ while that of ETF was up 117bps QoQ. Company indicated that 5bps exit load impact has been translated to lower distributor payout while GST effect may be 3-4bps that may be passed to distributors. Equity performance in 3-yr bucket remains best-in-class. As a result, market share in net equity flows is one of the highest at 15% in FY26. Stock market share continues to rise; it was up 6bps QoQ to 13.0% in Q4FY26.

* Operating leverage likely to continue: Other opex in Q4FY26 rose by 7.7% QoQ is due to CSR, royalties and technology. Opex has seen a downward trend, indicating improved efficiency despite investing in talent and building new capabilities. Cost to AUM may continue to trend down; we are factoring opex to AuM of 9bps in FY28E (vs 10bps in FY26).

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