KR Choksey's research report on HDFC Asset Management Company
The mutual fund (MF) industry had a decent year, with AUM crossing the INR 40 Tn milestone. This accomplishment highlights the industry’s robust performance, showcasing nearly a doubling of AUM over the past five years. HDFCAMC has reported revenue growth of 4.3% CAGR over FY19–23, while its operating profits/Profit After Tax has seen growth of 10.2%/ 14.6% CAGR, respectively, over the same period. The AUM has also been growing at a healthy pace, with 8.4% CAGR growth over the last five years. HDFCAMC has continued to expand its robust ‘phygital’ delivery channels. Through its ConneKt app, HDFCAMC has been equipping its partners with their own digital office, including a website, digital marketing capabilities to reach out across channels, and robust reporting backed by high-quality content. HDFCAMC expects to remain steadfastly dominant in its actively managed funds, to deliver alpha (outperformance against the index) across the board. The company bolstered its active portfolio through strategic expansions and product introductions. HDFCAMC has introduced various passive products to cater to evolving market demands, amplifying its offerings to investors.
Outlook
We expect Revenues/ EBITDA/ PAT to grow at 8.5%/8.2%/7.7% over FY22-25E. HDFCAMC shares are currently trading at a P/E of 24.5x/22.8x on FY24E/FY25E earnings. We are applying a P/E multiple of 25.5x on FY25E EPS of INR 77.2 to arrive at a target price of INR 1,970 per share (unchanged), an upside of 4.0% over the CMP. We maintain our rating of “ACCUMULATE” on the shares of HDFC AMC.
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