Nippon Life India Asset Management - Market share recovery remains key! - HDFC Securities

Mr. Krishnan ASV, Institutional Research Analyst, HDFC Securities

NAM has been able to stabilize its market share in the high-margin equity segment over the past two quarters at 7%. We expect it to focus on improving performance to continue recouping its lost market share. Additionally, we expect the company to benefit from increased credibility to raise HNI/institutional capital. Driven by cost optimization, we expect the company to deliver an FY21-23E revenue/NOPLAT CAGR of 12.7/17.5%. We maintain our ADD rating on the stock with a target price of INR360, valuing the stock at 36x Mar-23E NOPLAT + Mar-22E cash and investments. The stock is currently trading at FY22E/23E EV/NOPLAT of 39.9/32.8 and P/E of 34.4/28.9x.

4QFY21 highlights: Revenue was in-line (+1.1% vs. estimates) at INR3.01bn (+10.0%/+12.5% YoY/QoQ). Revenue yields improved 2bps sequentially to 52.8bps as the share of equity improved 200bps. The company has been able to arrest its falling equity market share (-4bps QoQ) as well as the debt market share (-6bps QoQ) over the past 2 quarters. Core operating profit at INR 1.58bn (+3.6/14.2% YoY/QoQ) was 4% below estimates, mainly as a result of higher admin and operating costs. Management attributed higher operating costs as one-offs towards digital and technological infrastructure. Recovery in equity markets resulted in treasury gains of INR600mn (vs. INR1.25bn loss in 4QFY20) and drove APAT to INR1.67bn (2Y CAGR +10%/-21% QoQ).

NAM's SIP market share dipped 41bps sequentially to 8%. The management is focussed on addressing its equity performance through diversification and improved risk management. The company launched 4NFOs on the passive and ETF side during 4QFY21.

Outlook: While we remain constructive on FY22E from an AUM growth perspective, NAM's improving equity performance remains key to drive any market share gains. For FY22E, we expect revenue/EBIT to grow 13/18% YoY respectively.

Shares of Nippon Life India Asset Management Ltd was last trading in BSE at Rs.341.15 as compared to the previous close of Rs. 340.3. The total number of shares traded during the day was 47680 in over 1473 trades.

The stock hit an intraday high of Rs. 349.9 and intraday low of 335.3. The net turnover during the day was Rs. 16235829.

Source : Equity Bulls

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