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Reports 4% beat on PAT and 10% beat on EBITDA

* The overall MF QUAAM grew 23% YoY/was flat QoQ at INR3.84t, led by 29%/16%/30%/38% YoY growth in Equity/Debt/ETF/Hybrid funds.

* Revenue from operations rose 30% YoY to ~INR4.5b (5% beat), reflecting ~2.5bp YoY improvement in yield on management fees to 46.4bp (+2.1bp QoQ) in 3QFY25. For 9MFY25, revenue grew 27% YoY to INR12.6b.

* Total opex grew 16% YoY to INR1.7b (in line), reflecting a cost-to-income ratio of 38.4% (vs. 43.1% in 3QFY24 and 41% in 2QFY25). Employee costs/ other expenses increased 11%/20% YoY to INR877m/INR707m.

* Revenue growth and operating leverage resulted in 41% YoY growth in EBITDA to INR2.7b; consequently, EBITDA margin stood at 61.6% (vs. 56.9% in 3QFY24 and 59.0% in 2QFY25).

* Other income declined 52% YoY/60% QoQ to INR384m (20% miss). For 9MFY25, it grew 8% YoY to INR2.3b.

* PAT for 3QFY25 stood at INR2.2b, up 7% YoY but down 7% QoQ (4% beat). For 9MFY25, PAT rose 23% YoY to INR7b.

* The distribution mix (%) remained stable sequentially, with Bank/National Distributor/MFDs/Direct mix at 9%/20%/54%/17%.

Valuation and view

* The stock trades at an attractive P/E multiple of 17x FY26E. Improving fund performance and scaling up non-MF business will improve profitability over the medium term. The stock trades at a steep discount to HDFCAMC and NAM.

* We expect ABSLAMC to report a CAGR of 18%/16%/19% in AUM/ revenue/core PAT over FY24-27. Assuming a 61% dividend payout ratio, we expect the company to generate a cumulative operating cash flow of INR43.8b during the same period.

* We believe the gap should narrow and assign a 36x core Sep’26E EPS. We reiterate our BUY rating on the stock with a one-year TP of INR1,100.

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