UTI Asset Management Company Ltd. share price target

UTI AMC’s operating revenue grew 29% YoY to INR3.8b (in line). Yields remained flat YoY and QoQ at 42.6bp in 3QFY25. For 9MFY25, revenue grew 26% YoY to INR10.9b.

UTI Asset Management Company Ltd (UTI AMC), along with its group companies, is present across various business segments like Mutual Funds, Alternate Investment Funds, Pension Business and Portfolio Management Services. Considering the future growth visibility, we assign BUY rating with target price of Rs.1,489 per share.

Q4 QAAUM grew 22% YoY to Rs 2.9tn, but equity and hybrid schemes combined saw sustained outflows

NAM: Strong growth but upside capped cut to HOLD. APOLP: Disappointing result on all fronts. ITC: Cigarette and paperboard businesses disappoint. LT: Order inflow guidance raised; maintain BUY. NTPC: Normal quarter, aggressive expansion; maintain BUY. MRCO: Domestic business still lacklustre. UTIAM: Core earnings miss estimates. ASTRA: Mixed quarter, guidance broadly intact

UTI had reported strong 37% QoQ core EBITDA growth in Q2FY24 compared to 26% QoQ growth in Q1FY24. Operationally Q2FY24 saw sequential equity / total market share decline of 8bps / 13bps to 5.68%/4.31% on the basis of AAUM, along with a decline in SIP flow/AUM share.

Q2 AUM grew 14% YoY to Rs 2.7tn but equity and hybrid schemes saw cumulative outflows for the fourth straight quarter

While UTI reported strong 26% QoQ EBITDA growth in Q1FY24, there was sequential equity / total market share decline of 5bps / 9bps on the basis of ending AUM, along with marginal decline in SIP flow/AUM share. However, employee cost is now showing consistent signs of stabilising (broadly at INR 1bn levels for 5 quarters), which should help earnings growth. International and retirement subsidiaries offer good diversification.

UTI AMC’s (UTI) Q4FY23 performance was weak due to higher other expenses, and dip in AUM and operating revenue yields. Our thesis of employee cost rationalisation and better-than-peer growth driven by diversification (20% total revenues from non-MF businesses) remains valid.

Equity outflows coupled with softer yields dampened Q4; core PAT flat YoY at Rs 571mn, well below our estimate

UTI AMC’s (UTI) Q3FY23 performance is on track to achieve Rs5bn/5.6bn EBITDA ex other income in FY23/24E. Our thesis of employee cost rationalisation and better-than- peer growth driven by diversification (20% total revenue from non-MF businesses) remains valid.

MTM loss from subsidiary UTI International coupled with softer yields dampens Q3; core MF business market share intact at ~6%

We continue to prefer UTI AMC (UTI) among the listed asset management companies
on the back of attractive valuations (FY24 core PE at 13.4x) and more levers than peers for earnings growth.

UTI AMC, the second largest AMC in India in terms of total AUM, is 8th largest in terms of QAAUM (`1,33,600cr) as of June 30, 2020. In terms of live folios, UTI AMC accounts for 12.2% of the 89.7mn industry folios as of March 31, 2020. Outlook & Valuation: At the upper end of

UTI AMC the 2nd largest Asset management company in terms of Total AUM while it is 8th largest AMC in terms of Mutual fund QAAUM as of June 2020. With a total AUM of Rs 1.3Tn as of June 2020, it commands a market share of 5.4% in the industry. Client base accounts of 12.2% (10.9mn folio) out of total industry folio of 89.7mn folio. AMC revenues and PAT declined from FY18 to FY20 but has high shares of B-30 centers in AUM at 24% vs 15.1% for the industry which provide growth opportunities. At upper price band, IPO is priced at a P/E of 25.7x and P/AUM of 5.3% which is discount to its peers AMC (Nippon India P/E of 37.7x, P/AUM of 6.1% and HDFC AMC with P/E of 35.6x...

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