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The Indian financial market witnessed a surge in the HDFC Asset Management Company (AMC) stock on October 16th, following the release of impressive Q2 FY25 results. The company’s shares jumped 6%, propelling its market capitalization to a record high of over Rs 1 lakh crore for the first time. This surge was driven by a robust 32% year-on-year growth in profit after tax (PAT) for the July-September quarter, supported by a significant 38% rise in total income.
Improved yields, a result of the rationalization of commissions, played a crucial role in the impressive performance. Additionally, the company witnessed steady momentum in its equity assets under management (AUM), further bolstering investor confidence. This positive sentiment was reflected in the overall growth of the AMC sector, with shares of other companies like Aditya Birla Sun Life AMC, UTI AMC, and Nippon Life India AMC also experiencing significant gains.
HDFC AMC’s Q2 net profit reached Rs 577 crore, a substantial increase from Rs 437 crore in the same period last year. Total income surged to Rs 1,058 crore, up from Rs 765 crore a year ago. The company’s AUM grew by 7.5%, reaching Rs 7.58 lakh crore, primarily driven by notable increases in debt and liquid market share. While the equity market share remained stable at 12.9%, the debt market share climbed to 13.5%, and the liquid market share expanded to 12.1%.
Brokerage houses offered mixed perspectives on the company’s performance. Jefferies maintained its 'Buy' call with a target price of Rs 5,450, highlighting the strong topline growth and yield uptick as significant drivers of profit before tax (PBT) growth. However, the brokerage acknowledged a one-time tax outflow related to legacy gains, which slightly moderated the PAT growth. Conversely, Morgan Stanley maintained an 'Equal-Weight' rating with a lower target price of Rs 4,120, citing the higher tax outflow following the Union Budget 2024 as a factor weighing on net profits.
Despite the mixed views, analysts generally agreed that the rationalization of commissions would ultimately lead to higher yields. The strong performance of HDFC AMC in Q2 FY25, combined with the positive outlook for the sector, suggests a bright future for the company, with its market capitalization poised for further growth in the coming quarters.