HDFC AMC surges 6% on strong Q2 results; NAM India hits 52-week high

HDFC AMC reported healthy performance in Q2-FY24 with around 4.7% QoQ growth in AUM to Rs 5.23 trillion and market share remaining steady at 11.2%

Shares of asset management companies (AMCs) were in focus on Friday, surging up to 6 per cent on the BSE in Friday's intraday trade in an otherwise weak market, after HDFC AMC reported healthy performance in the September quarter (Q2-FY24).

The HDFC Group company reported around 4.7 per cent quarter on quarter (QoQ) growth in asset under management (AUM) to Rs 5.23 trillion with market share remaining steady at 12.4 per cent.

Shares of HDFC AMC hit a 52-week high of Rs 2,910.70 as they rallied 6 per cent in the intraday trade today. The stock was trading at its highest level since October 2021. It had hit a record high of Rs 3,844 on November 22, 2019.

Besides HDFC AMC, shares of Nippon Life India Asset Management Limited (NAM India), asset manager of Nippon India Mutual Fund (NIMF), too, hit a 52-week high of Rs 397.20, up 5 per cent in the intraday trade. Meanwhile, the stock price of UTI AMC gained 4 per cent to Rs 828.20. In comparison, the S&P BSE Sensex was down 0.40 per cent at 66,145 at 12:53 PM.

In Q2-FY24, HDFC AMC reported net profit of Rs 437 crore as compared to Rs 364 crore in the same period last year (Q2-FY23). The rise in profit was in-line with the revenue growth. The AMC reported an 18 per cent year on year (YoY) growth in revenue from operations at Rs 643 crore.

With the change in control of the promoters from HDFC Ltd to HDFC Bank, management is optimistic of the opportunity to tap the distribution channel of HDFC Bank along with cross-selling opportunities. 

"HDFC AMC witnessed sequential yield improvement at ~51bp (49bp in Q1-FY24), which the management attributed to higher equity fund inflow. We expect a marginal improvement in yields due to the rising share of equity funds. HDFC AMC reported a healthy PAT, driven by better equity prices and yields," analysts at InCred Equities said.

The brokerage firm believes that the new total expense ratio (TER) norms will be applicable only from FY25 and, thus, it has increased FY24F EPS by 25 per cent. However, after the recent run-up, it believes that most positives are already valued in the stock price and there is limited upside from the current level.

According to ICICI Securities, strong growth of 12.1 per cent QoQ in equity AUM, higher than industry growth of 9.3 per cent, led to ~30 bps gain in market share to 12.5 per cent, on the back of healthy scheme performance and continued strong SIP flow.

Continued focus on garnering AUM through product launches, improved scheme performance and strengthening of distribution network remains positive and is expected to support revenue growth ahead. However, near to medium term positives seem to be factored in at current valuation, the brokerage firm said.

HDFC AMC remains a top performer in equity within 1-year and 3-year buckets while equity market share at 12.3 per cent continues to enhance (+31bps QoQ). Retail presence improved suggested by individual MAAuM higher than industry and larger pie in unique investor additions. 

"With HDFB gaining control post-merger, sales would be boosted due to stronger distribution focus," analysts at Prabhudas Lilladher said in result update. The brokerage firm maintains ‘buy’ rating on the stock with a target price of Rs 3,000 per share.