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Slight beat across parameters leads to 5% beat on PBT

NAM reported strong performance across key parameters to beat JMFe PBT by 5%. Investment management fees were reported at INR 5.7bn, +1.6% JMFe, -3.6% QoQ, +21% YoY. Opex was reported at INR 2,118mn, -2.8% JMFe, flat QoQ, +14% YoY. While employee expenses were broadly in line, the company moderated other expenses in a quarter where equity markets were volatile. With this, operating PBT came in at INR 3.5bn, +4.4% JMFe, -10% QoQ, +21% YoY. Other income was largely in line at INR 230mn, against INR199mn JMFe. The company reported PBT of INR 3.8bn, +5.0% JMFe, -2.5% QoQ, +1% YoY. Effective tax rate was 21.0%, against 25.0% JMFe, 24.6% in 3Q25 and 8.4% in 4Q24. PAT came in at INR 2,983mn , +10.6% JMFe, +1% QoQ, -13% YoY. Further, despite selfimposed restrictions on inflows into its small and mid-cap schemes, the company enjoyed a market share of 10.16% in SIP inflows for 4Q, and >10% of FY25 inflows, ex-NFOs. On FY26 outlook, there were two negatives. First, the company issued additional stock units to its employees, as a result of which the projected ESOP expenses for FY26 stands raised to INR 485mn against INR 225mn earlier. Secondly, management mentioned that they do not intend to further reduce distributor commissions in next 1-2 quarters, after realigning ~45% of the company’s equity AUM. This results in a 4% cut in our FY26e EPS. We do not cut FY27e EPS materially. We estimate 6%/12% equity returns in FY26e/FY27e and expect NAM to hold its market share of near 10%, resulting in EPS CAGR of 17% over FY25-FY27e. At CMP, the stock trades at 29x/23x FY26e/FY27e EPS. We value the stock at 26x FY27e EPS (against 24x earlier) of INR 28 to get a revised target price of INR 730 (up from INR 700). We maintain BUY.

* Revenue yields hold up despite a fall in equity share of QAAUM: Equity share of total QAAUM fell 140bps QoQ to 48.2%, however, blended yields held up at 0.41% as the fall in equity yields (with telescopic pricing) was arrested. Going ahead, we expect yields to decline only gradually as the AMC reduces payouts on its schemes. As of now, NAM has rationalised payouts in ~45% of its AUM and is watching the impact before taking further cuts.

* While costs were controlled in 4Q, ESOP costs to rise in FY26: In 4Q, while employee costs grew 4% QoQ, other expenses were contolled, falling 5% QoQ. As a result, opex was flat QoQ at INR 2,118mn, +14% YoY. The Board approved additional stock grants to employees, as a result of which the company raised its ESOP cost guidance for FY26 by INR 250mn. With this, we expect FY26e opex growth of ~13%.

* Valuation and view: At CMP, the stock trades at 29x/23x FY26e/FY27e EPS. While the near-term EPS growth outlook gets clouded with elevated ESOP costs and a pause in rationalisation of distributor payouts, improving outlook on equity markets augurs well for the company. The company paid cumulative dividends of INR 18 for FY25, ~90% of its EPS. We value the stock at 26x FY27e EPS (against 24x earlier) of INR 28 to get a revised Target Price of INR 730 (up from INR 700). We maintain BUY.

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SEBI Registration Number is INM000010361