Foreign Firm Haitong Maintains A “Buy” On This Mutual Fund Stock

Haitong International has maintained a "buy" call on the stock of Nippon Life Asset Management to Rs 347. The firm has reduced the price target slightly from Rs 350 earlier to the current target price of Rs 347.

What has happened over the past few years?

According to Haitong, lower growth in management fees on a YoY basis than Equity AUM growth is because industry is going through a phase where pricing pressure has been higher as can be seen by TER correction for NAM in Equity (incl. Hybrid scheme) from 104bps in Q1FY20 to 80bps as of Q3FY23 while Debt TER has reduced to 29bps in Q3FY23 from 41bps in Q1FY20. "In addition, newer inflows are coming at higher trail commission compared to older book. According to the management, 70% of the AUM is now on new trail commission," the brokerage has said.

Buy Nippon Life Asset Management with a target price of Rs 347

Haitong expects Nippon AMC's NP CAGR to be 7% over FY22-25 owing to higher base in FY22 (due to higher other income) and expect average RoE of ~26% over FY22-25. "Thus, we maintain our OUTPERFORM rating on Nippon AMC and value it using a three stage dividend discount model. We reduce our target price slightly from Rs 350 to Rs 347 on account of (a) cut in EPS estimates for FY23/FY24 by -1%/ -1% respectively and introduce FY25 estimates. Our target price implies an NTM PE multiple (FY24 and FY25 average) of 25x. The main risks to our rating are decline in the Indian equity market, and further changes in regulations," Haitong has said.

Assets under management increase

Nippon Life Asset Management actively managed equity (incl. Hybrid) QAAUM as of Dec'22 was at Rs1,302bn, +8%/+5% YoY/QoQ respectively while Debt QAAUM was atRs532bn as of Dec'22, -30%/-5% YoY/ QoQ resp, inline with industry trends. ETFs particularly showed positive momentum rising 33%/7%YoY/QoQ resp to Rs 683 million.

Disclaimer

The above-mentioned information is purely informational and is taken from the report of Haitong. Greynium Information Technologies, the Author and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.