Citi has initiated coverage on HDFC Asset Management Co (HDFC AMC) with “neutral” rating and a price target of Rs 1,850, saying it's a leader in an underpenetrated market.
HDFC Mutual Fund, the fund managed by HDFC AMC, looks well positioned to leverage the rising preference for mutual funds among individual investors, distribution reach, and strong brand, it says.
HDFC MF is the leader in equity assets managed (market share of 14 per cent) - these form 50 per cent of its assets under management (AUM) and drive its profitability, say Citi analysts.
The brokerage expects 21 per cent CAGR in HDFC MF's AUM during FY18-21, including 30 per cent CAGR in equity AUM, to drive 17 per cent CAGR in PAT. It expects average PAT / AUM of 25bps over FY18-21; the brokerage says the stock is “fairly valued”.
HDFC AMC stock had fallen 11 per cent since its IPO last month.