The Current Market Price (CMP) of UTI Asset Management Company is Rs. 860. HDFC Securities has estimated a Target Price for the stock at Rs. 1050. The stock is expected to offer 22% upside, in 1 year.
|Current Market Price (CMP)||Rs. 860|
|Target Price||Rs. 1050|
|1 year return||22.00%|
Revenue was in line with the estimate at Rs. 2.95bn (+4.6% QoQ), supported by better equity yields, which offset lower-than-estimated growth in equity MF AUM. Revenue as a percentage of MF QAAUM improved from 2.5bps to 52.7bps. However, the company’s market share dropped 23/13bps to 5.2/5% in the hybrid and active equity category. Also, NPS AUM market share further slipped 24bps QoQ to 27.4% due to lower allocation. Staff costs have significantly dampened the company’s profitability.
Comments by HDFC Securities
According to Yes Securities, “Moderating yields and elevated staff costs continue to drag core profitability (EBIT margin at 36%, a five-quarter low). While we draw comfort from management commentary around a buoyant flows environment and a strong growth outlook for the retirement solutions business, we remain wary of continued pressure on yields and staff costs in the medium term. We reduce our APAT estimates by 10-9 % over FY23E-24E to build in higher employee costs. We expect UTIAM to deliver FY21-24E 7% revenue CAGR and 8% operating profit CAGR, as a consequence of strong AUM growth and slight cost rationalization.”
About the company
UTI AMC has been managing assets across different businesses. These include domestic Mutual Fund, Portfolio Management Services, International business, Retirement Solutions, and Alternate Investment assets. UTI Mutual Fund has a long & distinguished pedigree, along with a nationwide distribution network spread across the length and breadth of the country. However, the company’s core operating profit fell 15% sequentially to Rs. 1bn and APAT fell to Rs. 0.54bn (-58% QoQ, a 64% miss, and the lowest in nine quarters).
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