ICICI Securities has initiated coverage on UTI Asset Management Company, pointing to an attractive valuation based on projected FY28 earnings. While the brokerage notes consistent management of standalone operating expenses, it highlights ongoing challenges regarding equity market share and subsidiary performance as key factors to watch.
Detailed Coverage
ICICI Securities has recently initiated coverage on UTI Asset Management Company, identifying the stock as a potential opportunity based on its current valuation. The brokerage projects the company will trade at approximately 12 times its estimated core profit for the 2028 financial year. This valuation outlook is supported by a forecasted 12.6% growth in total assets under management and a 7.8% rise in revenue through the 2028 period.
The brokerage analysis points to effective cost management at the standalone level, noting that UTI AMC achieved a 5.9% compound annual growth rate in operating expenses between fiscal years 2022 and 2026, when excluding one-off costs. These efforts are viewed as a stabilizing factor for the firm's core profitability, which is expected to grow at an 11.4% annual rate through 2028.
Despite the growth projections, the report highlights several areas of pressure that investors may monitor. UTI AMC has experienced a decline in its equity assets under management market share, which fell by 20 basis points in the 2026 financial year and a further 8 basis points in the first quarter of the 2027 financial year. Additionally, systematic investment plan flow share saw a decline of 18 basis points during fiscal year 2026, although there was a slight recovery of 2 basis points in the first quarter of fiscal year 2027.
The performance of the company’s subsidiaries also remains a point of focus. These units contributed a modest 92 million rupees and 5 million rupees in profit before tax for fiscal year 2026 and the first quarter of fiscal year 2027, respectively. The brokerage expects this contribution to remain relatively low in the coming years, averaging between 600 million and 700 million rupees annually.
To arrive at its valuation, the firm applied a 15 times multiple to its projected core earnings per share of approximately 45 rupees for fiscal year 2028, further supported by the company's cash investments. Moving forward, the impact of these figures on the overall business will depend heavily on the company's ability to recover market share in the competitive equity mutual fund segment and the future profitability of its subsidiary operations.