Target: ₹1,100

CMP: ₹695.10

UTI Asset Management Company has reported a core PBT of ₹110 crore (-3 per cent q-o-q) driven by fall in core-top-line yields to 47bps ( down 3 bps q-o-q). Management indicated that the fall can be primarily attributable to increase in mix of lower yielding ETF/FOFs in overall AUM (up 3 pps q-o-q).  However, core PBT yields were down 1 bps q-o-q to 18bps as the impact of fall in top-line yields was moderated by controlled opex during the quarter (down 2 per cent q-o-q). 

While the stock has underperformed Nifty by 14 per cent over past 12 months on account of one-offs which has impacted operating profitability improvement, we keep faith in the management guidance for continued opex moderation going ahead (driven by lower employee opex and operating leverage) and maintain our positive stance on the name given inexpensive valuations.

UTI AMC trades at a valuation of 10.1x FY25E P/E which is still at a discount to other listed peers. We expect the future price performance to be driven byAUM growth and improvement in operating profitability driven by expected cost moderation.

Further, we see a significant re-rating potential in UTI AMC if the news regarding potential acquisition of UTI AMC materialises. Inability to deliver on the opex moderation front remains a key risk to our stance