On Tuesday, ICICI Securities adjusted its stance on Prudent Corporate Advisory Services Ltd (PRUDENT:IN), downgrading the stock from an 'Add' rating to 'Reduce'. Despite the downgrade, the firm raised its price target to INR2,665.00 from the previous INR2,576.00.
The revision reflects Prudent Corporate Advisory Services' significant growth in assets under management (AUM), systematic investment plan (SIP) subscriptions, and mutual fund distributor (MFD) counts.
The company has experienced compound annual growth rates (CAGRs) of 31%, 28%, and 21% for AUM, SIP book, and MFD count respectively from the fiscal year 2019 to 2024. In the second quarter of fiscal year 2025, the firm also reported quarter-over-quarter growths of 11.6% in AUM, 12.1% in SIP, and 4% in MFD count.
The analyst noted that despite the consolidation of yields following the removal of the B-30 incentive, the upgrade in earnings estimates was prompted by higher-than-expected AUM growth and superior execution. Moreover, Prudent's insurance revenue saw a substantial increase of 45% in the first half of fiscal year 2025.
Prudent Corporate Advisory Services' potential for growth is further underscored by the fact that 45% of its client base has yet to enroll in a SIP scheme, and there is a possibility for a rise in insurance cross-sales. The company's AUM consists predominantly of equity at 96.7%, which is believed to offer higher growth potential compared to asset management companies (AMCs).
However, the report also identifies several risks, including any mark-to-market (MTM) fall in AUM, an increase in the regular mix, and potential cuts in commissions for both asset management and insurance. These factors influenced the decision to downgrade the stock to 'Reduce' despite the positive growth indicators and increased price target.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.