Buy Nippon Life India Asset Management Ltd for the Target 1,350 by Emkay Global Financial Services Ltd
NAM delivered a healthy quarter, with MF QAAUM growing ~4% qoq to Rs7.52trn while continuing to gain market share at 9.04% (+54bps qoq). Yields witnessed a slight qoq dip to 40.9bps, resulting in revenue of Rs7.7bn (+4% qoq), ~2% above our estimate. EBITDA at Rs5.1bn (Emkay: Rs5.0bn) was largely flat qoq due to higher employee costs and other expenses. Other income increased significantly to Rs1.7bn, driving PAT to Rs5.04bn (+31% qoq and ~14% above our estimate). NAM remained the fastest-growing AMC and topped the charts in market share accretion during the quarter. The company plans to launch differentiated products in the SIF category and is currently adopting a measured approach. The management plans to invest in technology, digital platforms, and brand building, resulting in elevated costs going forward. To bake in the 1Q developments, we tweak our estimates, leading to a ~2-3% cut in PAT over FY28-29E, while our FY27E PAT remains largely unchanged. We maintain BUY with an unchanged Jun-27E TP of Rs1,350, implying FY28E PER of ~42x.
Healthy show; continues to gain market share
MF QAAUM at Rs4.52trn grew ~4% qoq, driving ~54bps qoq increase in overall market share to 9.04%. Equity market share increased 34bps sequentially to 7.38%. Yields witnessed a slight dip to 40.9bps, leading to revenue of Rs7.7bn (~+4% qoq), ~2% above our estimate. Employee costs increased 10% qoq to Rs1.39bn and were lower than our estimate. However, other expenses rose 17% qoq to Rs1bn and were 10% above our estimate, driven by investments in brand building, technology, and digital capabilities. Consequently, EBITDA at Rs5.1bn remained flat qoq, while EBITDA margin dipped 240bps qoq to 66.2% and was largely in line with our estimate. Other income increased sharply to Rs1.7bn, driving PAT to Rs5.04bn (+31% qoq), ~14% above our estimate. Core PAT declined 9% qoq to Rs3.75bn due to a lower tax rate in 4Q and was ~2% above our estimate.
Maintained the tag of fastest-growing AMC; investments to drive higher costs
NAM continued to be the fastest-growing AMC among the top 10 AMCs and recorded the highest market share accretion during the quarter. While SIP flow market share remained in the high single digits, equity flow market share improved to double digits, with both exceeding its AUM market share. On SIFs, the management said the company is awaiting approvals for the launch of SIFs but has intentionally adopted a measured approach, as it plans to launch differentiated offerings. Given the investments in brand building, technology, and digital capabilities, costs are likely to increase going forward.
We maintain BUY and Jun-27E TP of Rs1,350
To bake in the 1Q developments, we tweak our estimates, which leaves revenue broadly unchanged. However, elevated costs result in ~2-3% cut in EBITDA over FY27-29E, leading to ~2-3% cut in FY28-29E PAT, while FY27E PAT remains broadly unchanged. Given its strong retail franchise, consistent market share gains, and widespread distribution, we maintain BUY and Jun-27E TP of Rs1,350, implying FY28E PER of ~42x.
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