Buy HDFC Asset Management Company, target price Rs 2275: JM Financial

JM Financial has buy call on HDFC Asset Management Company with a target price of Rs 2275. The current market price of HDFC Asset Management Company is Rs 1856.25. Time period given by analyst is one year when HDFC Asset Management Company Ltd. price can reach defined target.

HDFC Asset Management Company Ltd., incorporated in the year 1999, is a Large Cap company (having a market cap of Rs 39972.46 Crore) operating in Financial Services sector.

HDFC Asset Management Company Ltd. key Products/Revenue Segments include Income From Portfolio Management Services and Investment Management & Advisory Fees for the year ending 31-Mar-2022.


Financials
For the quarter ended 30-06-2022, the company reported a Standalone Total Income of Rs 532.90 Crore, down -8.27 % from last quarter Total Income of Rs 580.93 Crore and down -12.35 % from last year same quarter Total Income of Rs 607.99 Crore. Company reported net profit after tax of Rs 314.19 Crore in latest quarter.

Investment Rationale
HDFC AMC reported a steady quarter with operating PBT of INR 3.7bn (+2% YoY, -1% QoQ) on account of muted growth in core revenues and opex (+3% YoY and +4% YoY resp.) Overall MF QAAUM declined -4% QoQ (flat YoY) as debt MF QAAUM de-grew by 12% QoQ (-24% YoY) while equity MF QAAUM was flat QoQ (+16% YoY). Positively, core revenue yields improved to 50bps (vs 48bps QoQ) driven by improvement in proportion of higher yielding equity MF QAAUM in overall MF QAAUM to 52.1% (+200bps QoQ) while debt MF QAAUM mix declined to 22.3% (-210bps QoQ). Overall AUM and equity AUM market share witnessed marginal improvement to 11.2% and 11.5% resp. (+11bps QoQ and +7bps QoQ resp.). Management indicated that this was largely on account of improving share of HDFC AMC in net inflows and should sustain going ahead on the back of improved scheme performance. Further, HDFCAMC’s SIP flows increased to INR 12.8bn in Jun’22 (vs INR 12.3bn in Mar’22). THe brokerage has moderated AUM growth assumptions driven by recent fall in equity markets and outflows in debt segment and now build in AUM growth of 2.9%/19.6% over FY23/24E. Its core PBT growth estimates for FY23/24E are at flat/+9% YoY for FY23/24E. HDFCAMC is currently trading at 29x P/E (NTM) implying a 24% discount to its historical avg. valuations and we believe the stock’s price performance is highly contingent on the company’s market share gains/losses. The new leadership has taken steps in the right direction and we believe favourable outcomes over the next 12-18months should see the stock revert its underperformance relative to peers

Promoter/FII Holdings
Promoters held 68.8 per cent stake in the company as of 30-Jun-2022, while FIIs owned 16.51 per cent, DIIs 2.09 per cent.