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ABSL benefits from AUM mix change, which is not really structural

Result Highlights (See “Our View” below for elaboration and insight)

? Revenue: Revenue from operations at Rs 3,350mn was up 7.7%/7.7% QoQ/YoY, leading/lagging QAAUM growth of 4.7%/10% QoQ/YoY.

? Share of Equity in AUM: Share of Equity in AUM (including Hybrid funds) at 41.9% was up 194 bps QoQ but down -27 bps YoY (calculated on rounded off figures)

? Share of B-30 in AUM: Share of B-30 in AUM at 17.3% was up 130bps QoQ and 100bps YoY

? Channel mix: Share of MFDs, Banks, NDs and Direct was 32%, 9%, 17% and 42%, respectively in overall AUM (Ex-ETF)

? Operating profit margin: Operating profit margin for the quarter, at 57.3%, was up 267 bps QoQ but down -130 bps YoY

Our view – AUM mix change is not really a structural factor

Calculated overall revenue yield inched up ~1bp sequentially: The improvement in overall yield has been due to change in asset class mix. There has been a rise in the share of equity funds in the total MF QAAUM by 194bps QoQ. There has also been a slight uptick in debt fund yield during the quarter. It may be noted that, while on-book equity yield is about 70 bps, the incremental equity yield is about 55-60 bps.

The company has been taking steps to arresting decline in equity market share: The performance of most equity funds has improved. Furthermore, the company has appointed a co-CIO for equity, Mr. Harish Krishnan. The performance for Large Cap, Flexi Cap and Small Cap funds for the company has improved and hence, the company has witnessed incremental flows here. The share in gross flows have improved by 3-4% in these schemes as compared to previous quarters.

We maintain ‘NEUTRAL’ rating on ABSL with a revised price target of Rs 475: We value ABSL at 18.6x FY25 P/E, at which the stock would trade at an FY25 P/B of 4.1x.

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