Buy Nippon Life India Asset Management Ltd For Target Rs 1,150 By Emkay Global Financial Services Ltd
NAM delivered a healthy performance during Q4FY26, with MF QAAUM at Rs7.25trn (+3% QoQ) while its market share was up by 24bps on sequential basis. Revenue yield at 41.3bps increased by 1bp sequentially, led by a change in asset mix toward commodity ETFs. Resultantly, revenue at Rs7.39bn increased 5% QoQ, while EBITDA margin at 68.6% expanded by 200bps QoQ. The management plans to mitigate the 3-4bps impact on account of the new TER regulation by passing it to distributors. The management intends to maintain focus on growing absolute profitability in line with or higher than that of industry players rather than monitoring yields on basis points. To bake in the Q4 developments, we tweak our estimates which results in ~1-2% increase in PAT over FY27-28E. We maintain BUY and Mar-27E TP of Rs1,150 implying FY28E P/E of ~35x
Asset mix change drives yields higher
NAM clocked ~3% QoQ growth in MF QAAUM to Rs7.25trn despite market volatilities. The growth in AUM was primarily driven by ~16% QoQ growth in ETFs while Equity AUM was largely flat sequentially. MF QAAUM market-share inched up, to 8.89% (up by 24bps QoQ), while ETF AUM market-share at 21.4% increased by 109bps sequentially. Led by a change in asset mix toward relatively high-yielding commodity ETFs, revenue yield increased by 1bp sequentially to 41.3bps in Q4. Consequently, revenue at Rs7.39bn increased ~5% QoQ and was higher than our estimate of Rs7.06bn. EBITDA margin at 68.6% expanded by 200bps sequentially, higher than our estimate of 66.7% led by sequential decline in employee costs and lower other expenses. PAT at Rs3.85bn declined 5% QoQ on account of lower other income, but was higher than our estimate of Rs3.3bn owing to lower tax rate
NAM remains fastest-growing AMC; focus retained on absolute profitability
NAM has consistently been the fastest-growing AMC among the top-10 and saw the highest market-share accretion in the industry in FY26, at 8.89% (highest since Jun-19). Further, NAM’s Equity Net Flows market-share and SIP market-share remained higher than its Equity AUM market-share, which will drive further growth in AUM. The mgmt stated that the regulatory change with respect to TERs would result in a 3-4bps impact, which would be mitigated by passing it on to distributors. The company is strategically focusing on building the SIP book in hybrid, commodities, flexi-cap, and sector funds. The management continues to focus on driving absolute profit growth in line or higher than that of industry players rather than solely monitoring yields on basis points.
We maintain BUY and Mar-27E TP of Rs1,150
To reflect the Q4 developments, we tweak our estimates; this results in a ~1-2% increase in PAT over FY27-28E owing to marginally higher investment income. While NAM remains the fastest growing AMC among the top-10, its strong retail franchise, consistent investment performance, and ETF dominance position it well to drive profitable growth. We maintain BUY with unchanged Mar-27E TP of Rs1,150 implying FY28E P/E of 35x.
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