Markets have seen a fall this week as investors turned weary after comments from the US Federal Reserve and rising cases of Omicron. However, it may be good to do selective stock picking at the current moment. Brokerage firm Sharekhan has set a price target of Rs 502 on the stock of Nippon Life India Asset Management, implying an upside of nearly 50% from the current levels.
Nippon Life India Asset Management: progressing well
According to Sharekhan, Nippon Life India Asset Management's stated that business has progressed well, operating efficiencies are improving and it has regained market share. It termed its journey as 'regaining, reinventing and recreating' since it was renamed Nippon Life Asset Management in 2019.
"Nippon Life India Asset Management undertook several initiatives to boost profitability. With a focus on the retail segment which is important in terms of stickiness and profitability, the company saw its folio share rise to 13% in September 2021 from 10.2% in September 2020. It intends to have retail assets under management mix of 40-45% going ahead," the brokerage has said.
Increase in market share of the company
"We interacted with the management of Nippon Life India Asset Management (NAM) to understand the industry, business and growth outlook. It stated that business and operating efficiencies have progressed well and it continues to regain the market share. The management termed its journey as 'regaining, reinventing and recreating' since it was renamed Nippon Life Asset Management in 2019. The company has undertaken several initiatives with a focus on profitability," the brokerage has said.
Overall, the mutual funds industry has grown five times in the past 10 years. Although the industry AUM stood at Rs. 37.8 trillion in November 2021, growing by 24.5% y-o-y, but only 2% of unique investors have mutual funds investments. NAM's overall market share increased by 30 bps to 7.3% in September 2021 and the share of the retail folios has increased from 10.2% to 13%. The company is seeing retail investors coming back aided by a buoyant equity market.
Price target of Rs 502, buy the stock says Sharekhan
According to Sharekhan the is likely to benefit from leveraging of Nippon Life's network to garner offshore mandates which would be a key to its future growth. Further, a sustained flow into mutual fund and equity market and its widening distribution network is expected to retain its growth momentum.
"Additionally, its leadership position in the passive market (ETF space) is likely to benefit the company in terms of valuation as compared to its peers. At the current market price, the stock currently trades at 25.8x and 22.2x its FY23E and FY24E EPS. Hence, we re-iterate a Buy rating on Nippon Life India Asset Management with a price target of Rs. 502," the brokerage has said.
The stock has been picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. 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.