HDFC Asset Management Company Ltd. annual maintenance contract at its analyst meet sounded optimistic on growth potential of India’s annual AMC, drawing parallels to journey of U.S. markets from 1980s to 2000s. India has ~570 million permanent account number cards, while unique investors are 40.4 million suggesting only 7% penetration. HDFC AMC will be a dominant player in this growth journey.
Superior performance over the last ~three years (one-year bucket) has led to gains in equity market share which further improved to 12.3% (plus 31 basis points QoQ).
Net flows will be boosted due to stronger distribution focus, as engagement with HDFC Bank Ltd. has materially increased post-merger. A rise of ~10% in share of HDFC AMC sales by HDFC Bank could lead to a ~5% increase in average assets under management and core profits.
We see a core profit after tax compound annual growth rate of 12.6% over FY23-26E. Stock is trading at 32.2 times; we maintain our multiple at 35 times on September 25E core earning per share (five-year average. of 40 times) and keep target price unchanged at Rs 3,000. Retain ‘Buy’.