On Wednesday, Nomura/Instinet initiated coverage on HDFC Asset Management Co Ltd (HDFCAMC:IN) stock with a Buy rating, setting a price target of INR 5,000. The firm highlighted HDFC's strong position to capitalize on the growth potential of India's underpenetrated asset management sector.
According to the firm, HDFC Asset Management is one of the most profitable asset management companies (AMCs), thanks to its robust equity assets under management (AUM) and operational efficiency. The company boasts a 13.3% market share in retail AUM and has been making strides in increasing its presence in the equity segment.
The recent merger with HDFC, completed in July 2023, is expected to further strengthen HDFC AMC's market share. Nomura/Instinet anticipates that the company will see a compound annual growth rate (CAGR) of 19% in both AUM and core earnings over the forecast period from the fiscal year 2024 to 2028.
The analyst from Nomura/Instinet underscored the company's growth prospects, stating, "HDFC is well-positioned to benefit from India's underpenetrated asset management industry. It remains one of the most profitable AMCs, driven by strong equity AUM and operational efficiency.
The company leads with a 13.3% retail AUM market share. It is witnessing consistent improvement in market share in the equity segment. Post the HDFC merger (in Jul-23), we believe HDFC AMC is poised to capture more market share. We build in a 19% AUM CAGR and 19% core-earnings CAGR over FY24-28F."
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