Thanks to a strong improvement in the assets under management of equity schemes, ICICI Securities expects a strong possibility of earnings upgrades in FY22 for AMCs.
“We expect asset management plays will benefit from the improving equity mix for the third successive quarter in Q2FY22,” it added. The AUM of fund houses have grown 21 per cent during March-August period, aided by strong inflow into equity schemes and improving systematic investment plan.
Factoring in the year-to-date performance, relative cost structures and return on equity, the brokerage firm has upgraded the 2021-22 and 2022-23 earnings estimate for Nippon Life India Asset Management Co by 14 per cent and 12 per cent and for UTI Asset Management Co’s by 14 per cent and 20 per cent respectively.
For HDFC Asset Management Co, ICICI Securities has upgraded by FY 22 and FY23 revenues by 4.7 per cent and 2 per cent, respectively.
Asset base to grow
The brokerage expects the average assets under management of HDFC AMC, Nippon Life India AMC, and UTI AMC to grow at 16 per cent, 32 per cent, and 29 per cent respectively in 2021-22.
The brokerage maintained an ‘add’ rating on shares of Nippon Life India Asset Management but with a revised price target of ₹477 as against earlier target of ₹430. Similarly, ICICI Securities has maintained a ‘buy’ rating on UTI Asset Management and increased price target to ₹1,410 from ₹1,200.
‘Hold’ on HDFC AMC
However, ICICI Securities has downgraded its rating on the shares of HDFC Asset Management to ‘hold’ from ‘add’ as it believes that a higher-than-expected fall in overall yields can dent the asset management company’s earnings. The brokerage has increased its price target on the stock by 2 per cent to ₹3,350 (₹3,284 earlier).