HDFC Securities' research report on UTI Asset Management Company
While UTIAM’s equity performance and market share have improved, high staff costs continue to pose a significant challenge to core profitability. We do expect employee costs reduction (to 20.2bps of AAUM in FY23E vs. 25.8bps in FY21E) as a result of natural retirements. AUM growth and cost rationalisation are expected to drive near term performance and we expect the company to deliver an FY21-23E revenue/NOPLAT CAGR of 10.3/32.5%.
Outlook
We retain a BUY with a DCF-derived target price of Rs 650 (10% execution discount to DCF), valuing the stock at 27.5x Sep-22E NOPLAT + Sep-21E cash and investments. The stock is currently trading at FY22E/23E EV/NOPLAT of 18.1/14.0 and P/E of 20.0/17.1x.
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