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Nippon Life India AMC - Q2FY21 Result Update - ICICI Securities

Posted On: 2020-10-28 09:24:34

Nippon Life India AMC (Nippon) posted modest PAT growth of 6% YoY to Rs. 145 crore on a consolidated basis as cost rationalisation and healthy growth in other income compensated for a decline in revenues. Overall AUM declined on a yearly basis but saw some improvement sequentially. MF AUM fell marginally by 1% YoY on account of ~10% YoY reduction in equity AUM while debt and liquid AUM showed growth of 2% and 20% YoY, respectively. Consequently, contribution of equity MF AUM declined from 43% a year ago to 39% as on Q2FY21 while debt and liquid fund contribution increased to 30% and 17% from 29% and 14% in Q2FY20, respectively.

Valuation & Outlook

Volatility in equity markets and inflow of funds into the shorter end of debt schemes is expected to keep pace of improvement in AUM and yields slower. Healthy client acquisition (on both retail, corporate) gives indication that the AMC has gained customer confidence. Strong distribution and digital focus is expected to further enable improvement in traction in AUM. Cost rationalisation and operating leverage are seen keeping operating expenses steady. We continue to remain positive on the business model, though we are watchful on AUM growth trend and product launches. Therefore, we maintain our target price at Rs. 300/share, valuing the stock at ~7.6% of MF AUM FY22E AUM. We revise our recommendation from BUY to HOLD.

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Shares of Nippon Life India Asset Management Ltd was last trading in BSE at Rs.273.35 as compared to the previous close of Rs. 273.4. The total number of shares traded during the day was 40187 in over 2423 trades.

The stock hit an intraday high of Rs. 277.15 and intraday low of 270. The net turnover during the day was Rs. 10966889.

Source: Equity Bulls

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