The target price for HDFC AMC has been set at Rs 5,000, signalling an upside potential of 14.4% while for NAM, a target price of Rs 785 has been given, an upside of 21%. The target price of Rs 1,300 has been given for UTI AMC, which indicates an upside potential of 5%.
“Indian AMCs trade at richer valuations compared with most global peers, and we expect their valuation premium to sustain led by higher growth potential, better profitability and lower risks of passive funds taking over active funds as penetration level remains very low,” said the Nomura report.
Here is what the brokerage firm said regarding each stock:
HDFC AMC: Buy| Target price: Rs 5,000| Upside potential: 14.4%
HDFC is well-positioned to benefit from India’s underpenetrated asset management industry. It remains one of the most profitable AMCs, driven by strong equity AUM and operational efficiency. The company leads with a 13.3% retail AUM market share. It is witnessing consistent improvement in market share in the equity segment. Post the HDFC merger (in Jul-23), we believe HDFC AMC is poised to capture more market share. We build in a 19% AUM CAGR and 19% core-earnings CAGR over FY24-28F.NAM: Buy| Target price: Rs 785| Upside potential: 21%Nomura has a constructive view on NAM driven by its consistent equity performance, strong market share gains, and diversified product suite. As India’s fourth largest asset manager, the global brokerage firm believes that NAM is well-positioned to benefit from rising industry flows, especially in small-/mid-cap segments. With a robust retail franchise, growing SIP market share, and a >90% dividend payout policy, a strong performance is expected ahead, projecting a 21% AUM CAGR and 21% core-earnings CAGR over FY24-28F.
UTI AMC: Neutral| Target price: Rs 1,300| Upside potential: 5%
UTI’s overall and equity AUM CAGR has been lower at 17% and 13% over FY21-24, respectively (vs. 19% and 32% for the industry) led by weak fund performance. Hence, its overall/equity AUM market share has been on a declining trend. Nomura finds the consistent decline of market share concerning and hence, built in a lower AUM CAGR of 16% over FY24-28F (vs. 20% for the industry). The core earnings CAGR is expected to be steady at 18% over FY24-28F, however, PAT CAGR is expected to be soft at 3% on account of normalisation of other income.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)