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Target: ₹1350
CMP: ₹976.45
UTI Asset Management Company has corrected by about 22 per cent from its peak post 3QFY22 results. The correction was driven by a sharp contraction in top-line MF yields and management guidance of further moderation in FY23.
However, we maintain our positive stance on the stock as core fundamental positives are still in place: a) AUM growth story to continue with improvement in equity and debt market share (AUM CAGR of 22 per cent over FY21-24) and b) improvement in operating profitability driven by cost moderation and increase in top-line revenues aided by non-MF businesses.
UTI Asset Management trades at a valuation of 15.5x FY24E P/E which is at a discount of 40 per cent/28 per cent to HDFCAMC/ NAM’s valuations. We expect the future price performance to be driven by: strong AUM growth driven by superior equity fund performance and renewed focus on distribution; and improvement in operating profitability driven by cost moderation.
We re-iterate UTI AMC as our top-pick in the AMC space with a TP of ₹1,350 valuing it at 22.0x FY24E P/E. A reverse-DCF analysis indicates a conservative AUM and earnings CAGR estimates of 14 per cent and 11 per cent respectively over the next 10 years; indicating upside risks to our target price.
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