Nomura has maintained its 'Buy' rating on HDFC Asset Management Company (HDFC AMC) but lowered its target price to Rs 3,050 from Rs 3,130, citing intensified competition and a decline in flow share. The revised target implies an upside of 27%, the brokerage said in its October 16 report.
HDFC AMC reported operating profit before tax (PBT) of Rs 9.1 billion in the second quarter of FY27, up 16% year-on-year and 10% sequentially, beating Nomura's estimate by 5%, driven by higher operating revenue and improved yields.
"Revenue yield increased 1.3bp q-q (vs our expectation of a 0.2bp decline)," Nomura said. Operating revenue was 3.1% above its estimate, while operating PBT yield improved 2 basis points sequentially to 37 basis points as operating expense intensity declined 1 basis point.
Quarterly average assets under management (QAAUM) grew 3.6% sequentially and 10% year-on-year, led by 5.8% growth in the equity segment. Higher revenue yield and controlled staff and non-staff costs drove core PBT growth of 10% sequentially, around 5% above estimates. Net profit after tax (PAT) beat estimates by 6%.
Nomura raised its revenue yield assumptions after two consecutive quarters of expansion but expects yields to normalise in the coming quarters. It also factored in lower assets under management (AUM) growth amid weakness in equity markets, resulting in earnings per share (EPS) cuts of 3% for FY27-FY29.