HDFC Asset Management Co. shares are likely to deliver better returns than rival ICICI Prudential Asset Management Co., according to Kotak Institutional Equities.
Analysts said AMCs are grappling with sharply weaker trailing returns despite resilient retail active equity inflows, alongside a relatively benign medium-term regulatory environment. At the same time, the sector faces rising investment needs in new growth avenues such as alternatives, offshore products and distribution capabilities.
Larger players, backed by strong fund performance, appear better positioned to capture a higher share of flows. While sector valuations have corrected, they continue to trade at a premium to broader markets.
The domestic brokerage has initiated coverage on ICICI Prudential AMC with an ‘Add’ rating and a 12-month target price of Rs 3,150, indicating an upside potential of 11% over the previous close.
Meanwhile, the firm upgraded HDFC AMC to ‘Buy’ but revised target price to Rs 2,750 from Rs 3,000 following recent correction. The new target still implies an upside potential of 17% upside.
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ICICI Prudential AMC
According to analysts, the business is well placed to deliver steady AUM and earnings growth, aided by a large systematic book, a strong hybrid franchise and a growing higher fee alternatives platform. The company has a consistent long-term track on most operational and financial metrics.
“While we like the long-term franchise strength, current valuations limit a more bullish stance on the stock,” they said in a note.
The ICICI Prudential AMC stock is up 7.8% year-to-date.
HDFC AMC
Following an 11% year-to-date correction, analysts said HDFC AMC’s valuations have become more comfortable, prompting a constructive stance on the stock. They forecast a 16-17% core earnings CAGR over the next two years, driven by an estimated 20% AUM growth, partly offset by 3% annual fee compression, with marginal benefits from operating leverage.
Operationally, HDFC AMC is expected to continue benefiting from strong fund performance, supporting healthy inflows, although analysts factor in lower absolute flows in FY27-FY28 compared with the last financial year. Over the medium term, the focus remains on building credible growth drivers in alternatives to help offset ongoing fee pressure and rising costs, the brokerage said.
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