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HDFC Asset Management Company Ltd>
  • CMP : 1,956.5 Chg : -70.70 (-3.49%)
  • Target : 2,400.0 (15.83%)
  • Target Period : 12-18 Month

27 Apr 2022

Market share erosion bottoming out; outlook improving

About The Stock

HDFC AMC is among the largest and profitable mutual funds with an QAAUM of ~₹ 4.3 lakh crore as on March 2022.

  • Market share as on Q4FY22 was at 10.8%
  • Strong distribution network with 228 branches and over 75,000 empanelled distribution partners

HDFC AMC reported a soft quarter on an overall basis.

  • Closing AUM up 3.1% YoY to ₹ 4.1 lakh crore; equity AUM up 1.4% QoQ
  • Revenue from operation up 2.7% YoY but down 6.1% QoQ to ₹ 516 crore
  • Overall yields remain broadly steady at 51 bps QoQ
  • PAT came in at ₹ 343 crore, below estimate, on soft topline performance
What should Investors do?

HDFC AMC’s share price has grown over 19% since its listing in August 2018 and in past few months the price has corrected as well that provides good entry opportunity especially with improving outlook.

  • We upgrade our rating to BUY from Hold
Target Price Valuation

HDFC AMC has maintained fundamental strength with superior yields and profitability. We value HDFC AMC at ~28.5x FY24E EPS and revise our target price from ₹ 2550 to ₹ 2400

Key Triggers for future price performance
  • Expected improving fund performance to attract more inflows
  • Launch of new NFOs across various segments could aid AUM growth
  • To command premium valuations on account of superior return ratios and expected rise in business growth
  • Market share loss should bottom out and could witness some stability
New Stock Ideas

Apart from HDFC AMC, in our coverage we like MCX.

  • MCX is a leader in commodity derivative exchanges in India with over 96% market share in commodities future space as on FY21
  • BUY with target price of ₹ 2000

Key financial summary

| crore FY19 FY20 FY21 FY22 3 year CAGR
FY23E FY24E 2 year CAGR
Revenue from operation (| crore) 1915 2003 1853 2115 3% 2452 2805 15%
PBT (| crore) 1375 1653 1749 1855 11% 2073 2385 13%
Net Profit (| crore) 931 1262 1326 1393 14% 1555 1789 13%
EPS (|) 43.9 59.2 62.2 65.4   73.0 83.9  
P/E (x) 47.2 35.0 33.3 31.7   28.4 24.7  
AUM /share (|) 15754 14976 18548 20980   23716 27130  
P/AUM (%) 13.2 13.8 11.2 9.9   8.7 7.6  
RoE (%) 30.3 31.3 27.8 25.2   24.9 25.4  




Quarterly Variance Table


  Q4FY22 Q4FY22E Q4FY21 YoY (%) Q3FY22 QoQ (%)   Comments
Revenue from operation 516.3 552.2 502.9 2.7 549.7 -6.1   Sequential decline due to lower AUM
Revenue/AUM  0.51% 0.50% 0.51% 0 bps 0.50% 0 bps   Increase in equity proportion led to increased yield
Other Income 64.7 89.6 42.6 51.6 86.2 -25.0    
Net Total Income 580.9 641.9 545.6 6.5 635.9 -8.6    
Staff cost 71.4 82.4 63.8 11.9 77.5 -7.8    
Other Operating Expenses 66.9 76.5 58.7 13.8 73.3 -8.7   Cost controll measures aid grip on Opex
Total Expense 138.3 158.9 122.6 12.8 150.7 -8.3    
PBT 442.7 483.0 423.0 4.6 485.2 -8.8    
Tax Outgo 99.1 120.7 106.9 -7.3 125.4 -21.0    
PAT 343.6 362.2 316.1 8.7 359.8 -4.5   PAT below our estimate as top-line slows
Total AUM 4,07,600 4,42,660 3,95,500 3.1 4,36,700 -6.7   Higher outflows from debt segment leads to fall in AUM

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I/We, Kajal Gandhi, CA, Vishal Narnolia, MBA, Sameer Sawant, MBA Research Analysts Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.          


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