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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
Q4FY22

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
(FY19-22)
FY23E FY24E 2 year CAGR
(FY22-24E)
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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