AMC rally likely to gain further steam after robust Q2 performance

Brokerages up targets as AMCs deliver earnings surprise

After a robust performance in the second quarter (Q2), analysts believe that shares of asset management companies (AMCs) are poised for further gains, despite having surged significantly in the past year.

 

Most brokerages have raised the target price for all the four AMC shares.  

HDFC AMC, the largest among the listed AMCs, reported a 32 per cent year-on-year (Y-o-Y) jump in net profit at Rs 577 crore. The profit went up by 47 per cent for Nippon India AMC. Aditya Birla Sun Life (ABSL) AMC and UTI AMC reported a 36 per cent and 31 per cent jump in profits, respectively. 

The sharp rise in profits came on the back of strong growth in high yielding equity assets amid market rally. Majority of the listed AMCs have also managed to either grow or keep their market share steady during the quarter. 

 

HDFC AMC has kept the market share steady at  around 11.5 per cent with focus on equity AUM driven by sustained performance, robust SIP flows (market share at around 15 per cent) and accretion in unique customer base, according to ICICI Direct. 

It has revised the target price from Rs 4,700 to Rs 5,500, stating that “though the stock has witnessed an uptick in recent past, considering relatively higher business growth without any balance sheet risk, we remain positive on the stock”. 

The stock is up 64 per cent in the last one year. 

Nippon India AMC has continued to gain market share. Its equity AUM market share rose 43 bps Y-o-Y to 6.96 per cent, as per Axis Securities. 

“Nippon Life India AMC’s performance across equity schemes stayed robust in Q2, with 8 of the 9 analysed schemes falling in the first or second quartiles on a three-year return basis. Ex-NFOs, net inflow market share in equity plus hybrid schemes remained in double digits, materially higher than AUM market share,” Equirus Securities said. 

It sees the share rising to Rs 800. Axis Securities has set a target price of Rs 815. 

The share, which closed at Rs 670 on Tuesday, is up over 80 per cent in the one-year period. 

While HDFC AMC and Nippon India AMC have remained on a strong footing for at least the last couple of years, ABSL AMC and UTI are also showing improvements in business metrics in recent quarters. 

ABSL AMC can be a turnaround story with an attractive risk-reward ratio, said InCred Equities, adding that its market share loss has started to ease. 

“The quantum of market share loss in case of equity AUM eased to around 4.55 per cent from about 4.7 per cent last quarter," it stated. The brokerage has raised the target price from Rs 950 to Rs 1,000. The share is up 79 per cent in the one-year period.

Analysts see green shoots in UTI's case as well. The company has managed to post strong AUM growth in Q2 and arrest the outflows from equity schemes, according to brokerage reports. 

“The company continues to face redemption pressures with a net outflow of Rs 0.4 billion in Q2, but this marks a substantial improvement from net outflows Rs 13.5 billion in Q1. The improvement has largely been in hybrid schemes; meanwhile, equity schemes continue to see outflows,” Nuvama Institutional Equities said. 

Brokerages said the outlook for the overall sector remains positive in the long-term. 

“Long-term prospects of the Indian AMC industry remain intact given the low penetration levels in India vis-à-vis developed countries and is a play on the financialisation of savings in India and NAM is likely to benefit from these trends. We revise our AUM estimates marginally upwards, resulting in an upward revision in our revenue/earnings estimates by 4-6 per cent/3-4 per cent over FY25- 27E,” Axis Securities said.    Jio Fin, BlackRock incorporate AMC to undertake mutual fund business 

Jio Financial Services (JFS) on Tuesday announced its joint ventures Jio BlackRock Asset Management Private Limited and Jio BlackRock Trustee Private Limited were incorporated on October 28. The two entities have received the approvals primarily for mutual fund busin­e­ss. JFS will invest Rs 82.5 crore for its 50 per cent stake in Jio BlackRock Asset Management, while it will invest Rs 40 lakh for its half-ownership in Jio BlackRock Trustee Private, the statement added. On July 26, 2023, JFS and BlackRock announced an agreement to create Jio BlackRock a 50:50 joint venture.   BS Reporter