HDFC AMC Q2 Results Review - Earnings Upgrade Continues Owing To Equity: PL Capital

PL Capital Report

HDFC Asset Management Company Ltd. saw a good quarter as revenue was 2.8% higher than our estimate owing to better-than-expected yields at 46.8 basis points (our estimate: 45.5 bps) led by strong growth in equity quarterly average assets under management of 14.8% QoQ to Rs 4.7 trillion, which resulted in core income beat of 2.5%.

Yields inched up QoQ as the company rationalized net yields in Aug-24 and Sep-24 across 10-12 schemes. Core PAT was a miss due to DTL impact. Equity performance within the one-year and three-year buckets remains best-in-class, which resulted in strong net flows’ market share of 14.6% in H1 FY25.

We raise core EPS for FY25E/FY26E by ~8% each due to upgrade in FY25E closing equity AuM for the industry from 27% earlier to 40% since equity growth from Mar-Sep’24 has been strong at 30% (8% flows and 22% markt to market).

Over FY24-26E, we see healthy core PAT CAGR of 27% (earlier 22%). Stock is valued at 34 times on Sep’26 core EPS. We maintain multiple at 41 times, but raise target price to Rs 5,360 from Rs 4,700 as we roll forward to Sep’26. Reiterate ‘Buy’

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