Q3FY23 Review: HDFC AMC: In-line performance; market-share loss arrested

25 Jan 2023 , 10:38 AM

HDFC AMC reported weak results for Q3FY23. The results though were in line with estimates of IIFL Capital Services. PAT grew 2.7% YoY to Rs3.7 billion; in line with estimates. Although QAAUM remained flat YoY at Rs4.5 trillion, profit growth was driven by 2.5% YoY increase in revenue yield to 50.3bps, owing to increasing share of high-margin equity assets in total AUM (+800bps YoY to 54%). EBITDA margins fell 160bps YoY to 73.8%, due to additional NFO marketing expenses. In Q3, company launched 10 NFOs (equity + debt) including thematic– Business Cycle Fund. In terms of market share, although the company has lost 70bps YoY to 11%, the decline was largely seen in Debt (-120bps YoY) and liquid (- 100bps YoY) segments. In Equity, the company has been able to maintain market share ~12%, given better fund performance and new launches. On overall basis, company has maintained market share at 11%.

HDFAMC has successfully arrested its market-share loss; improved fund performance could also drive gains in near term. In base case analysts at IIFL Capital Services assume it to grow in line with industry, and thus, expect its earnings to grow at 11% p.a. over FY23-25. The stock has seen sharp de-rating in last 18 months, visible signs on market-share gains is must for re-rating.

Analysts at IIFL Capital Services have a Buy recommendation on the stock.