Financial investment products such as mutual funds and insurance have little penetration in Indian society, in fact the assets under management (AUM) of the Indian mutual fund industry as a share of GDP grew from 4.3% in FY2002 to 16% in calendar year 2020. % Has occurred. But this is much lower than the world average of 63%. In the US, MF AUM as a share of GDP stands at 140%.
Given the low penetration, the scope for growth in this industry is high. According to CRISIL, MF Total/Equity QAAUM is expected to witness a CAGR of 13-15% over FY22-26E, driven by a growing investor base, higher disposable income levels resulting in improved household and financial savings, increased geographic penetration, investment in easily motivated. and digitization.
In a recent report, Prabhudas Lilladher said that it has initiated coverage on HDFC Asset Management Company (Target Price: ) with Buy rating. 2,100) and UTI Asset Management Company (Target Price: 830).
“Will see a healthy CAGR of ~14% over FY23-25E, driven by core profit operating leverage. The valuation on FY25E core EPS stands at 10x (56% discount to HDFCAMC). Brokerage said, we assign 15x multiple to arrive at TP of Rs 830.
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The brokerage is constructive on the Indian AMC space driven by its huge growth. It listed the following factors as headwinds for the sector
1. Financial assets account for 41% of household savings, though MF allocation is only 2%
2. Low penetration despite 435 million PAN card holders, while MF unique investors are less than 34 million.
3. Industry set to expand by ~13-15% in FY 22-26E
“Post merger, HDFCAMC may get higher share of gross MF sales by HDFCB, as it currently accounts for only 25% (peers at 70-98%). Improved asset mix and cost control led to healthy profitability with operating return at 36 bps which should be sustained. Valuation is at 22.5x FY25E core EPS; We give a multiplier of 27x to arrive at a TP of Rs 2100, says Prabhudas Lilladher’s report.
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