Improving stock returns, buy this asset management stock for a good return: HDFC Securities

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Target price

The current market price (CMP) of asset management firm UTI is Rs. 860. HDFC Securities has estimated a target price for the stock at Rs. 1050. The stock is expected to offer 22% upside in 1 year .

Stock market outlook
Current market price (CMP) Rs.860
Target price Rs.1050
1 year back 22.00%
Business performance

Business performance

Revenues were in line with the estimate of Rs. 2.95 billion (+4.6% QoQ), supported by better equity returns, which offset weaker than expected growth in equity fund assets under management. MF QAAUM revenue percentage improved 2.5 basis points to 52.7 basis points. However, the company’s market share fell 23/13 basis points to 5.2/5% in the hybrid and active equity category. Additionally, NPS AUM market share slipped a further 24bps QoQ to 27.4% due to lower allocation. Personnel costs weighed heavily on the company’s profitability.

HDFC Securities Commentary

HDFC Securities Commentary

According to Yes Securities, “Moderate yields and high personnel costs continue to weigh on core profitability (EBIT margin at 36%, a five-quarter low). While we are reassured by management’s comments on buoyant flow environment and strong growth prospects for retirement solutions, we remain cautious on continued pressure on yields and personnel costs over the medium term We are reducing our APAT estimates by 10-9% on FY23E- 24E to account for higher personnel costs We expect UTIAM to deliver FY21-24E 7% revenue CAGR and 8% operating profit CAGR, driven by strong growth in assets under management and a slight rationalization of costs.”

About the company

About the company

UTI AMC manages assets in different companies. These include domestic mutual funds, portfolio management services, international business, retirement solutions and alternative investment assets. UTI Mutual Fund has a long and distinguished pedigree, as well as a national distribution network spread across the length and breadth of the country. However, the company’s core operating profit fell 15% sequentially to Rs. 1 billion and APAT fell to Rs. 0.54 billion (-58% QoQ, a miss of 64% and the lowest in nine quarters).

Warning

Warning

The above stock was selected from HDFC Securities’ brokerage report. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author, and the brokerage are not responsible for any losses caused as a result of decisions based on the article.

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