HDFC Securities has given Buy recommendation for UTI Asset Management Company with a target price of Rs. 650 in its research report issued on Feb 02, 2021
HDFC Securities’ research report on UTI Asset Management Company
While UTIAM’s equity performance and market share have improved, high staff costs continue to pose a significant challenge to core profitability. We do expect employee costs reduction (to 20.2bps of AAUM in FY23E vs. 25.8bps in FY21E) as a result of natural retirements. AUM growth and cost rationalisation are expected to drive near term performance and we expect the company to deliver an FY21-23E revenue/NOPLAT CAGR of 10.3/32.5%.
We retain a BUY with a DCF-derived target price of Rs 650 (10% execution discount to DCF), valuing the stock at 27.5x Sep-22E NOPLAT + Sep-21E cash and investments. The stock is currently trading at FY22E/23E EV/NOPLAT of 18.1/14.0 and P/E of 20.0/17.1x.