Aditya Birla AMC (Buy)
While the share of high-yield equity AUM of Aditya Birla Sun Life AMC has risen rapidly over the past few years to 37.2 per cent as on September 2021, up 1,289 bps from March 2017, we expect equity share in asset mix to increase further to 44.9 per cent by FY24.
This would be on MTM gains and rising retail participation. Higher share of equity is expected to hold revenue yield at nearly 42 bps in FY24, down 0.4 bps vs FY21.
Our analysis of Value Research data (as on October 2021) shows ABSLAMC has a mere 6.3 per cent of assets rated as
“outperforming” (4 Star and above). Within the listed pure-play AMC space, its equity performance lags that of UTIAMC’s at 61.5 per cent and Nippon India Asest Management’s 46.2 per cent. In our view, performance of ABSLAMC managed funds needs significant improvement, which would become an additional driver in attracting higher share of equity flows.
Growth in equity AUM and Operating leverage to result in continued margin expansion and earnings growth.
We initiate coverage of ABSLAMC with a Buy rating and a DCF-based target price of ₹715 with 30.8x FY23 EV/NOPLAT, which is at a 27.5 per cent discount to that of NAM’s 42.5x). It is trading at 27.0x FY22 EV/NOPLAT and 24.3x FY23 EV/NOPLAT.
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