INSUBCONTINENT EXCLUSIVE:
JM Financial has a buy call on HDFC Asset Management Company with a target price of Rs 1,850.
The current market price of HDFC Asset
Management Company is Rs 1,533.95.
Time period given by the brokerage is one year when HDFC Asset Management Company price can reach the
Investment rationale by the brokerage-
One of the best plays on financial savings opportunity: The under penetration of mutual funds in
Long term AUM growth rates have been healthy (18 per cent CAGR over last 19 years) and we see them sustaining in the future
from cyclical whipsaws in the market
Other TER cuts introduced in FY19 (15bps TER cut, B15 to B30) have been almost completely passed on to the distributors
At the same time, SEBI has also banned upfront commissions and commission-related expenses paid out through the AMC PL, effective from
This is expected to be positive to near-term profitability for the AMC, as now fresh inflows also become profitable, and could offset the
We expect operating profits (PBT, ex-other income) to grow 14 per cent / 16 per cent in FY20E / FY21E.
Premium valuations should sustain;
initiate with BUY: HDFCAMC trades at c.29x FY21E P/E and 10 per cent of FY19E AUM
While this optically appears rich in comparison to global AMCs, we believe the structural tailwinds in India and industry leadership
position of HDFCAMC should lead to sustenance of these multiples
We expect HDFCAMC to deliver 17 per cent earnings CAGR over FY18-21E despite a reset of industry profitability in FY20 driven by new
Structurally, we expect this company to deliver 20 per cent+ earnings growth over a cycle
We value HDFCAMC at 34 FY21E P/E resulting into a target price of Rs 1,850 (+21 per cent upside)
