IGI Logo

NAM’s MF QAAUM grew ~5% qoq in 2Q while yields dipped ~2% qoq, resulting in revenue of Rs7.96bn (+4% qoq), missing our estimate of Rs8bn. EBITDA margin improved by 130bps sequentially to 67.5%, coming in higher than our estimate of 66.1% led by largely flat employee costs and lower ‘other expenses’. PAT at Rs3.2bn was impacted by lower-than-expected ‘other income’ and a one-time SEBI settlement fee expense. Going forward, Management would continue to invest in technology, brand, digital, and people; it maintains its opex growth guidance of ~18-20% while remaining watchful of market cycles. To bake in the 2Q developments, we tweak our estimates, resulting in a ~1-4% increase in revenue which leads to a ~3-7% increase in EBITDA over FY27-29E. FY27E PAT reduces by ~4% owing to the one-time expense while FY28-29E PAT increases by ~4-5%. We maintain BUY on NAM and Sep-27E TP of Rs1,300, implying ~40x FY28E PER

Slight dip in yields results in lower revenue vs estimate; EBITDA margin expands qoq

NAM was the fastest-growing AMC with ~5% qoq growth in MF QAAUM, while revenue yields dipped ~2% qoq resulting in revenue at Rs7.96bn (+4% qoq), missing our estimate of Rs8.0bn. The sequential dip in yields was attributed to telescopic pricing, with Equity yields seeing a decline. EBITDA at Rs5.38bn (Emlay estimate: Rs5.3bn) grew 6% qoq, driven by flat employee expenses on a sequential basis and qoq decline in other expenses. The company saw a one-time impact of Rs0.97bn toward SEBI settlement fees. PAT at Rs3.25bn declined ~36% qoq, coming in lower than our estimate of Rs4.16bn due to lower other income and one-time SEBI settlement fees.

Continues to be the fastest-growing AMC; investing for the long term

In 1HFY27, NAM was yet again the fastest-growing among the top-10 AMCs, basis overall and Equity AUM, and maintained stable market share in the quarter. Management stated that the company saw broadly similar net inflows during 1Q and 2Q, with net flow market share at a high single-digit and higher-than-AUM market share. NAM saw healthy flows across the traditional large-cap, mid-cap, multi-cap, and multi-asset allocation funds. The lower share of incremental growth in the number of investors was attributed to the company’s strategy of not launching NFOs. Management stated that NAM would add senior professionals in the AIF business which is expected to drive up employee costs. Further, it mentioned that the company would continue to invest for the long term in technology, branding, and people, while maintaining opex growth guidance of ~18-20%.

We maintain BUY and Sep-27E TP of Rs1,300

To bake in the 2Q developments, we tweak our estimates which results in a ~1-4% increase in revenue, driving ~3-7% increase in EBITDA over FY27-29E. FY27E PAT reduces ~4% owing to the one-time SEBI settlement fees, while FY28-29E PAT increases by ~4-5%. Given its strong brand, retail franchise, and healthy performance, NAM is poised to drive AUM growth. We maintain BUY on the stock with unchanged Sep-27E TP of Rs1,300, implying FY28E PER of 40x.

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354