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Asset Management Companies - Positive trends to support Q1FY22 earnings - ICICI Securities

Posted On: 2021-07-18 06:24:28 (Time Zone: UTC)

Asset management plays will benefit from the improving equity mix for the second successive quarter in Q1FY22. However, the overall average AUM (AAUM) growth remains in low single digits QoQ. Hence, sequential earnings growth will depend more on cost and yields performance. Increase in equity mix has not always translated to higher yields. Yields will also be a critical element for CAMS earnings. Yields were largely stable in FY21 for CAMS, but may decline in FY22 in lieu of AUM growth. At an aggregate level, flows, SIP and NFO data remain positive. In terms of AAUM market share, HDFC AMC witnessed marginal dip in equity and debt market share, NAM's debt AAUM and UTI's equity AAUM market share witnessed improvement.

- Movement in equity market share: Based on AMFI monthly AUM data, HDFC AMC equity AAUM market share declined marginally from 12.8% in Q4FY21 to 12.73% in Q1FY22 (Jun'21 equity AUM stood at 12.65%). NAM equity market share AAUM improved from 6.7% in Q4FY21 to 6.9% in Q1FY22 (Jun'21 equity AUM market share stood at 6.84%). UTI equity AAUM market share improved from 4.6% in Q4FY21 to 4.74% in Q1FY22 (Jun'21 equity AAUM stood at 4.76%).

- Movement in debt market share: Based on AMFI monthly AUM data, HDFC AMC debt AAUM market share dipped marginally to 14.42% in Q1FY22 from 14.37% in Q4FY21 (June'21 debt AUM market share stood at 14.4%). NAM reported gains in its debt AAUM market share. Q1FY22 market share stood at 7.2% vs 6.8% in Q4FY21. (June'21 debt AAUM market share stood at 7.4%). UTI debt market share at 3.89% in Q1FY22 witnessed marginal decline from 3.93% in Q4FY21 (Jun'21 market share stood at 3.8%).

- HDFC AMC earnings estimates: We expect HDFC to report PAT/core PAT of Rs3.6/2.9bn, up 15%/3% in Q1FY22. HDFC AMC QAAUM remained flat sequentially (up 1% QoQ). We have marginally increased overall yields to factor in the increase in equity mix as a result of which revenue is expected to grow 2% QoQ to Rs5bn. We expect total operating expenses to be marginally higher sequentially (mostly due to ESOPs) which will lead to similar performance at operating profit levels.

- NAM earnings estimates: NAM is expected to report PAT/core PAT of Rs1.7bn/1.4bn. NAM AUM grew 5% QoQ which is translating into revenue growth of 5% (we have factored no change in revenue yields QoQ). Operating expenses are expected to decline sequentially as we factor run rate of Rs450mn in other operating expenses and Rs700mn employee cost based on Q1/Q2/Q3FY21 trends. We expect other income to decline in Q1FY22 to Rs473mn because of which PAT is expected to grow by 3%, while core PAT is expected to grow by 13% QoQ.

- UTI earnings estimates: UTI is expected to witness 12% QoQ growth in its core PAT driven by 12% growth in the overall revenue (which includes the impact of rise in investment management fees in its pension subsidiary). Comparative valuations remain attractive for UTI. Any positive cost performance can be a positive trigger.

- CAMS earnings estimate: We added Apr'21-Jun'21 AUM of the AMCs under CAMS to arrive at managed AAUM of Rs22.88bn which has grown 2.6% QoQ. We expect overall revenue to grow 3.2% to Rs2bn. We have factored a decline in equity yields and kept debt yields flat. Operating margins expected to be slightly lower sequentially. We expect CAMS to report PAT of Rs650mn on the back of higher other income

- NFOs have been healthy in 2021: Between Jan'21 and Jun'21, MFs have been able to garner Rs192bn through NFOs of which equity / debt / fund of funds / index fund schemes contributed Rs87bn / Rs46bn / Rs31bn / Rs10bn, respectively. Fund of funds category includes funds that offer international exposure to domestic investors. Within equity, multi cap (Rs19bn), sectoral/thematic (Rs48bn) and focused funds (Rs6.8bn) saw maximum fund mobilisation.

Source: Equity Bulls

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