UTI AMC slides 7% on disappointing December quarter earnings

In Q3, the company's revenue from operation declined 10 per cent YoY at Rs 309 crore, while profit after tax was down 9 per cent YoY at Rs 127 crore.

Shares of UTI Asset Management Company (AMC) dipped 7 per cent to Rs 899 on the BSE in Monday’s intra-day trade after the company reported a weak set of numbers for the December quarter, with revenue from operation declining 10 per cent year-on-year (YoY) to Rs 309 crore. The profit after tax for the quarter was down 9 per cent YoY at Rs 127 crore.

However, UTI Mutual Fund Quarterly Average Assets Under Management (QAAUM) grew 36 per cent YoY at Rs 2.24 trillion during the quarter. Declining yields, coupled with elevated staff costs, continue to drag core profitability during the quarter. Earnings before interest and tax (EBIT) margins stood at 44 per cent as compared to margins of Nippon Life India AMC/HDFC AMC at 61 per cent and 75 per cent, respectively.

With today’s fall, the stock has corrected 26 per cent from its record high level of Rs 1,217 touched on August 31, 2021. At 02:33 pm, it was down 6 per cent at Rs 907, as compared to a 1.8 per cent rise in the S&P BSE Sensex.

“While we draw comfort from management's commentary around a buoyant flows environment and a strong growth outlook for the retirement solutions business; we remain wary of continued pressure on yields in the medium - term. We reduce our revenue estimates by 5-8 per cent over FY22E-24E to build in further yield compression,” brokerage HDFC Securities said in a result update.

"As new flows replace old book, management expects yields to witness continued compression in the coming quarters. However, the company plans to develop smart beta products on the passives front (higher yields in passives) to cushion blended yields. We maintain BUY rating on the stock with a revised target price of Rs 1,215 (27.9x Sep-23E NOPLAT + Sep-22E cash and investments)," it said.