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Equity business remains strong for now

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

* Revenue: Revenue from operations at Rs 6,713mn was up 4.4%/20% QoQ/YoY, compared with growth in QAAUM of 5.1%/24% QoQ/YoY

* Share of Equity in AUM: Share of Equity in AUM (including Hybrid funds) at 60.6% was up 300 bps QoQ and 680 bps YoY

* Share of B-30 in AUM: Share of B-30 in AUM at 18.8% was up 60 bps QoQ and 120 bps YoY

* Channel mix: Share of Banks, MFDs, NDs and Direct channel was 13.1%, 37.8%, 24.8% and 24.3%, respectively in Equity QAAUM

* Operating profit margin: Operating profit margin for the quarter, at 76.2%, was up 119 bps QoQ and 235 bps YoY

Our view – Management sees significant potential in largecap equity

The company has gained almost 100 bps in equity fund market share over the past 12 months: The largecap category has not grown much and, based on relative valuation and on feedback, there is a lot of potential for growth here. The company has a top class product in the form of HDFC Top 100 in this category.

There is a loss in debt fund market share but that is not on account of underlying reasons: The company was a late entrant in debt index funds since it was waiting for regulatory clarity. Excluding the impact of this, the market share in debt mutual funds has been broadly flat. Furthermore, the group limit exposure to HDFC group may have been hit for certain institutional clients.

We maintain ‘NEUTRAL’ rating on HDFCAMC with a revised price target of Rs 3,700: We value HDFCAMC at 42x FY25 P/E, with the implied P/B being 12.9x.

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