Target: ₹610

CMP: ₹493.75

We initiate coverage on Nippon Life Asset Management Co (NAM India) with ‘BUY’ rating given: consistent equity outperformance translating to improved net flows and in-turn market share gains; focus on stronger investment process and risk management; and robust retail franchise as indicated by enhancing SIP AUM and healthy addition of unique investors plus folios over FY19 to 9MFY24.

Significant under-penetration in Indian MF industry suggests strong growth prospects of AMC space which could benefit NAM (4th largest player).

Market share declined in debt/equity over FY17-21 due to credit/brand related issues and equity under-performance. After Nippon bought majority stake, focus was on strengthening investment process and risk management. Thrust was to align KPIs with objective performance of the research team, to generate superior alpha with consistent performance.

We expect healthy core earnings CAGR of 23.4 per cent over FY24-26 led by higher than industry equity AAuM growth and operational efficiency. Analysis across top-10 MFs suggests that weighted alpha for NAM in 1-yr bucket materially improved from Feb’21 and NAM has consistently featured in top-3 MFs since May’21.

The stock is valued at 25x FY26E core EPS implying 32 per cent discount to HDFC AMC.

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