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Centrum Broking
Nippon Life India AMC (Buy)
CMP: ₹228.95
Target: ₹284
Revenue fell by 9.4 per cent q-o-q to ₹275 crore (vs estimate about ₹280 crore). Other income missed estimates of ₹39.9 crore and was negative at (₹125 crore) led by write down of equity/ETF scheme and debt funds investments made in NAM-India schemes. Employee cost declined by 35 per cent q-o-q to ₹52.9 crore (est. ₹56.9 crore) and marketing and other discretionary spends were controlled leading to a 21 per cent q-o-q decline in other expenses. This led to higher core operating profit of ₹160 crore (+11 per cent q-o-q). Hence PAT fell by 97.2 per cent q-o-q to about ₹4.1 crore vs est. of ₹129 crore. Board recommended a dividend of ₹2 per equity. FY20 PAT came in at ₹416 crore vs est. ₹541 crore.
We lower our AUM growth estimates for FY21 while accounting for lower employee costs and rebound in equity markets in FY22 (positively impacting yields). This might result in lower PAT by 6.8 per cent/3.1 per cent for FY21/FY22E vs previous estimates.
We maintain our P/E multiple at 30.6x to arrive at a target price of ₹284 (vs. ₹293 earlier). Maintain ‘buy’.
Risks to our call: Lower than expected AUM growth, higher opex, and any regulatory changes that could have potential negative impact on the industry / business.
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