We retain an ADD with a TP of Rs 740 (15/25x Sep-22E Broking/AMC APAT, + 0.7/0.5x for Sep-22E treasury/ MOHL). Strong cash/derivative volume at +42.1/102.6% YoY drove capital markets APAT +63.3 YoY to Rs 818mn. Recovery in equity markets with some outflows meant net improvement of just 14.4/7.2% YoY/QoQ in closing AUM. The AMC's APAT recovered +31.7% QoQ to Rs 382mn. Significant MTM gain (Rs 2.1bn, +286.1% YoY) on treasury resulted in MOFS (ex. MOHFL) APAT growth of 120.5/22.5% YoY/QoQ. We have increased our FY21E APAT estimate by 21.3% to factor in the higher treasury and lower operating expenses, while mildly changing FY22/23E estimates.

Despite weak performance, HDFCAMC continues to be the largest active equity fund manager with a market share of 13.9%. We also note that ETF/Index funds continue to gain traction as individual folios have grown at an FY15-FY21TD (Sep-20) CAGR of 64.8% to 3.6mn while assets have increased to Rs 213bn (CAGR of 59.0%). Lastly, we observe that blended equity commissions for most fund houses have increased after 3QFY20. We expect AMC performance to improve from hereon as market conditions stabilise and inflows return. While increased volatility and active equity outflows of Rs 204.8bn in FY21TD have dented the performance of AMCs, we do expect a more benign environment as markets are near all-time high levels and 4QFY21 will see ELSS inflows. Performance at most listed fund houses except for UTIAMC continued to disappoint as a higher percentage of rated active equity AUM slipped to underperforming

We retain an ADD with a lower TP of Rs 700 (15/25x Broking/AMC, + 0.7/0.5x for treasury/ MOHL). Strong growth in derivative ADTVs (39.5% QoQ) bolstered capital markets APAT 52.1/53.1% YoY/QoQ. An improvement of 0.3/9.7% YoY/QoQ in QAAUM meant that AMC's APAT recovered 20.9% QoQ. Management continues to increase provisioning (+52.0% QoQ), resulting in a 30.7% QoQ decline in MOHL's PBT. Significant MTM gain (Rs 1.73bn, +249.1% YoY) on treasury resulted in MOFS (ex. MOHFL) APAT growth of 74.3% YoY. We have increased our FY21E APAT estimate by 23.9% to factor in the higher treasury and broking profits, while mildly changing FY22/23E.

General Insurance:ICICIGI: Over FY21E we expect lockdown and partial working conditions to result in lower top-line growth, but improved CORs on a YoY basis. We upgrade our rating to REDUCE on ICICIGI with a revised TP of Rs 1,141 (Sep-22E P/E of 26.4x and a P/ABV of 5.2x) as valuations are high and market is ignoring risks on lower price hikes and de-tariffication action of motor TP. Life insurance:Our preferred picks are SBILIFE and MFSL with ratings of BUY and ADD and TPs of Rs 1,040 (+25.3%) and Rs 645 (+13.7%), respectively. Asset managers: Our top pick in the space remains MOFS: The AMC business is showing traction despite a difficult environment. Broking business continues to show great strength, as ADTVs remain strong. We retain ADD rating on the stock with a revised TP of 765 i.e. P/E of 12/30x Broking/AMC business Sep-22E EPS. Brokers: ISEC: After a recent correction in the stock price, we upgrade stock to ADD with a revised TP of Rs 530 (i.e. 23x Sep-22E EPS).

Motilal Oswal (MOSL) reported a mixed Q1FY21 performance wherein broking revenue was healthy but asset & wealth management saw pressure. The topline stayed flat at | 633 crore (excluding MTM impact) while earnings increased 29% YoY to | 167 crore, led by MTM gains on investments....

We have mildly tweaked our estimates and retain ADD with an unchanged TP of Rs 715. A strong spurt in cash volumes (88.2% YoY) bolstered capital markets APAT 63.5% YoY (-5.9% vs. estimates), while a steep decline of 16.2% YoY in QAAUMs meant that AMC's APAT declined 33.3% YoY (-8.8% vs. estimates). Management enhanced provisions to 27.8% (+556bps QoQ) of GNPLs due to the potential COVID-19 impact, which resulted in MOHL reporting a 35.1% YoY lower APAT. Significant MTM gain (Rs 1.3bn, +272.3% YoY) on treasury resulted in MOFS (ex. MOHFL) APAT growth of 98.1%.

We reduce our estimates but retain BUY with a 5.2% lower TP of Rs 633, as core (broking and AMC) profit growth outlook weakens for FY21E. For 4QFY20, broking segment PAT was hit by expansion costs and declined 7.8% QoQ, while steep MTM hit on AUMs hit the AMC as PAT declined 12.9% QoQ. Management sold bad loans to reduce NPLs, while slippages remained low resulting in the housing finance business delivering a PAT growth of 117.3/9.3% YoY/QoQ. Large MTM loss of Rs 3.5bn on the firms treasury, however resulted in a consolidated (ex. MOHL) net loss of Rs 2.7bn.

For the AMC business, we are concerned about fund raising, and regulatory clampdown. We remain wary of increased competition in broking. Lastly, despite much of the negatives in MOHL being factored in, the business needs to display scalability. We maintain a SELL with a TP of 711 i.e. 10/20x Broking/AMC business Dec-21E EPS. Key Risks: any sharp turnaround in fund raising and broking market activity, stronger scale up and lower stress in legacy book at MOHL. Treasury income (Rs 545mn, +82.3% beat), boosted MOFS (ex-MOHL) reported 3QFY20 PAT to Rs 1.49bn (+11.0/-3.1% YoY/QoQ). However 9MFY20 core cap markets/AMC performance remains weak as PBT declined 9.9/9.0% YoY. We tweak our estimates but retain SELL (unchanged TP of Rs 711), as core profit growth remains elusive.

The Indian broking industry has a large of number of players, many being proprietary in nature while large brokers still offer trading and investment services to customers. In terms of market share, as per active clients, top 10 brokers contribute ~63% in industry size. Among the same, top two brokers constitute ~15% of market share in active clients, followed by ~46% market share contributed by the next eight players. Top two players constitute 15% in ADTO of the market. Indian brokers have progressed from being pure brokers (bank led brokers & non-bank led full service brokers) to distributors...

With significant deterioration in macros, we anticipate slowdown in all business verticals. For the AMC business, we are concerned about fund raising, and regulatory clampdown. We remain wary of increased competition in broking. Lastly, despite much of the negatives in MOHL being factored in, the business needs to display scalability. We maintain a NEUTRAL with a TP of 645 i.e. 10/19x Broking/AMC business Sep-21EPS. Key Risks: any sharp turnaround in fund raising and broking market activity, stronger scale up and lower stress in legacy book at MOHL. Driven by higher than expected treasury income (Rs 270mn, -20.4% QoQ and capital markets PBT (Rs 653mn, -6.8/+9.6% YoY/QoQ), MOFS (ex-MOHL) reported a PBT of Rs 1.44bn (+7.1% vs. est.). RPAT (ex-MOHL) of Rs 1.54bn was 3.85x/37.2% YoY/QoQ mainly due to tax reversal. We marginally tweak our estimates and retain NEUTRAL with TP of Rs 645.

With significant deterioration in macros, we anticipate a substantial slowdown in all the business verticals over at least the next 2 quarters. For the AMC business, we are concerned about fund raising, fee renegotiations and regulatory clampdown impacting growth, while for broking we are wary of increased competition. Lastly, despite much of the negatives in MOHL being factored in, the business needs to display scalability and improvement in asset quality. Challenging macros compel us to downgrade our FY20E/21E earnings (ex-MOHL) by 16.3/16.7%; we also cut our multiples for the AMC business to 17x (-15%) and thus maintain a NEUTRAL with a TP of 545 (+9.3%). Key Risks: any sharp turnaround in fund raising and broking market activity, stronger scale up and lower stress in legacy book at MOHL. MOFS (ex-MOHL) reported an in-line APAT of Rs 1.12bn (-3.2% vs. est). APAT for AMC/capital markets segment were at Rs 409/356mn (-8.5/45.6% YoY). Difficult macros drive our earning cuts; retain NEUTRAL with TP of Rs 545.

On the AMC side we remain concerned about fund raising, fee renegotiations and regulatory clampdown, while on broking we are wary of increased competition. Lastly, despite much of the negatives in MOHL being factored in, the business needs to display scalability. Challenging macros compels us to retain SELL. Key Risks: Positive macro environment driving up fund raising and broking environment and stronger scale up in MOHL. Led by treasury gains and IB deal win, MOFS (ex-MOHL) reported APAT of Rs 1.38bn (+21.7% vs. est). Performance at the relatively structural businesses (broking + AMC) was in-line as difficult fund raising and highly competitive broking environment persist. Despite MOFS being a high quality franchise, tough macros compel our SELL rating with TP of Rs 650 (20x/10x AMC/Capital Markets FY21E PAT).

We thus downgrade the stock to a SELL and retain our SoTP of Rs 613 (-13.6%). We remain watchful and await 4QFY19 earnings for fresh information. Contrary to our neutral stance, MOFS has shot up by ~11.1% in the last few weeks. In this note we outline the optimism built in the CMP as we have failed to discover strong credible reasons for this sharp up-move.

We initiate coverage with a NEUTRAL rating and SoTP of Rs 611 (+7.6%). Motilal Oswal Financial Services (MOFS) runs Indias largest PMS (AUM Rs 150bn), is an emerging MF (rank 16) and is 8th among retail brokers. The group has investments of Rs 19.8bn, of which ~82% is invested in own funds. MOFS has a differentiated client franchise and will gain from financialisation of savings.

Motilal Oswal Financial Services Ltd Q2FY19 results Comment Operating Income rose by 5.39% to Rs. 682.07 Cr in Q2FY19 when compared to the previous quarter. On the other hand, it decreased by 15.33% when compared with Q2FY18.

Operating Income decreased by 14.04% to Rs. 646.47 Cr in Q1FY19 when compared to the previous quarter. Motilal Oswal Financial Services Ltd Q1FY19 results Comment

Operating Income increased by 3.13% to Rs. 752.1 Cr in Q4FY18 when compared to the previous quarter. Motilal Oswal Financial Services Ltd Q4FY18 results Comment-