Brokerage firm Prabhudas Lilladher has maintained a 'buy' rating on HDFC Asset Management Company with a target price of ₹2,850. The outlook is supported by a rise in core income and a shift toward higher-value equity products. However, investors are tracking the company's equity fund performance, which has recently faced competition and impacted market share.
Prabhudas Lilladher has maintained its positive rating on HDFC Asset Management Company, setting a target price of ₹2,850 per share. This decision comes after the asset manager reported a 4.8% growth in core income in its recent quarterly performance. The brokerage highlighted that the company's financial health is being supported by an improved revenue yield, which moved up to 48.3 basis points—a gain of 1.3 basis points over the previous quarter.
For investors, understanding how an asset manager makes money is key. Asset management companies earn fees based on the type of assets they manage. Equity funds, which carry higher risk and potential return for investors, typically command higher management fees compared to debt or liquid funds. HDFC AMC has actively shifted its asset mix, with equity assets now accounting for 63% of its total portfolio, an increase of 139 basis points. This move toward a higher share of equity products is a primary driver behind the company’s ability to improve its revenue yield.
Despite the positive shifts in product mix, the company is facing challenges regarding its net equity flow market share. The brokerage noted that the performance of several of the company's equity funds has lagged against benchmarks over the past one to three years. In the mutual fund industry, consistent performance is essential to attract new money from investors. When fund performance slows, it can lead to lower inflows compared to peers, creating a headwind for the company’s market share.
HDFC AMC continues to benefit from its strong distribution network and presence in high-growth segments such as small-cap, mid-cap, and flexi-cap funds. These categories have seen significant interest from retail investors across the industry, providing a buffer against volatility in other parts of the market. This presence in high-demand areas has helped the company remain resilient even as it navigates the competitive landscape.
The brokerage has adjusted its valuation multiple for the stock, moving it to 33x from 36x, while maintaining the target price based on earnings projections for September 2028. For shareholders and potential investors, the most critical factors to monitor going forward include the company’s success in improving the performance of its equity schemes against market benchmarks, the stability of its revenue yields in a competitive environment, and its ability to capture inflows in high-growth mutual fund categories.