HDFC AMC Q4 Earnings Jump 43%: Brokerages Adjust Target Prices Upward

HDFC Asset Management Company (HDFC AMC) announced its financial results for the fourth quarter ending March 2024, showing a significant increase in net profit and revenue. The company’s consolidated net profit surged by 43.77 percent year-on-year, reaching Rs 540.84 crore compared to Rs 376.17 crore in the same period last year. The consolidated revenue also increased, climbing 28.55 percent to Rs 695.43 crore from Rs 540.95 crore. These strong results were accompanied by a robust Quarterly Average Assets Under Management (QAAUM) of Rs 6.12 lakh crore.

Despite the positive results, shares of HDFC AMC fell nearly 2 percent in early trading after the announcement. At 9:20 am on the day after the results were released, the stock was trading at Rs 3,670.

Brokerages responded to the news with mixed views, largely maintaining a hold or equal-weight stance while raising target prices. Here is what some leading brokerages said:

HSBC: The analysts maintained their hold rating on HDFC AMC, raising the target price to Rs 3,505 from Rs 3,410. They noted that while assets under management (AUM) are expected to grow, income yields could face pressure, leading to slower earnings per share (EPS) growth from FY25-27 compared to AUM growth. The estimated EPS compound annual growth rate (CAGR) is projected at 12 percent, slower than the AUM CAGR of 18 percent.

Morgan Stanley: This brokerage also retained its equal-weight rating while increasing the target price to Rs 3,325 from Rs 3,000. According to their analysts, the positive result in net profit was due to a lower deferred tax charge, while the Profit Before Tax aligned with expectations. They decided to maintain their equal-weight rating due to “elevated valuations in the context of structural pressure on equity yields.”

Nuvama: Analysts at Nuvama kept their hold rating but slightly reduced their target price to Rs 3,900 from Rs 3,970. They highlighted that although there was an increase in equity AUM, blended yields dropped by 2.7 basis points year-on-year to 45.4 basis points, due to a one-time adjustment in yields resulting from higher-than-expected distributor payouts.

It’s important to note that despite the drop in the stock price following the results, HDFC AMC has had strong long-term performance, with a gain of over 108 percent in the last 12 months and around 129 percent over the past five years.

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