Motilal Oswal Sees HDFC AMC Reaching Rs 3170

Motilal Oswal Reiterates Buy Rating for HDFC AMC

HDFC Asset Management Company (AMC) has reported a 17% year-over-year (YoY) growth in its operating revenue, reaching INR10.5 billion in the fourth quarter of fiscal year 2026 (4QFY26). This growth, however, declined by 2% quarter-over-quarter (QoQ) in line with expectations.

The company's yields came in at 45.4 basis points (bp) in 4QFY26, a decline from 46.6bp in 4QFY25 and 46.5bp in 3QFY26. For the fiscal year 2026 (FY26), HDFC AMC's revenue grew by 18% YoY to INR41.2 billion.

Breaking down the company's operating expenses, total opex stood at INR2.1 billion, growing 21% YoY and 4% QoQ. Employee costs, which accounted for INR1.3 billion, saw a 29% YoY increase but remained flat QoQ. Other expenses, totaling INR783 million, rose 7% YoY and QoQ each. As a percentage of assets under management (AUM), opex stood at 8.9bp, a slight increase from 8.8bp in 4QFY25 and 8.6bp in 3QFY26.

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The company's earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at INR8.5 billion, a 16% YoY increase but a 4% QoQ decline. The EBITDA margin stood at 80.4%, a decline from 81% in 4QFY25 and 81.5% in 3QFY26. For FY26, EBITDA reached approximately INR33 billion, a 18% YoY increase.

Profit after tax (PAT) stood at INR6.2 billion, a 3% YoY decline but a 19% QoQ decline. PAT margins came in at 59.2%, a significant decrease from 70.8% in 4QFY25 and 71.6% in 3QFY26. For FY26, PAT reached INR28.6 billion, a 16% YoY increase.

The company expects a gross impact of approximately 3-4bp on its existing book due to the effective TER regulations from April 2026. To mitigate this impact, HDFC AMC plans to optimize commissions and control costs, limiting the impact on its profit and loss (P&L).

Outlook

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Motilal Oswal has retained its earnings estimates for FY26-FY28 while reducing its other expense assumptions. The research firm expects a compound annual growth rate (CAGR) of 13%/14%/15% in revenue/EBITDA/PAT over the next three years. Additionally, HDFC AMC is expected to experience approximately 16% AUM growth over FY26-28.

The research firm reiterates its buy rating for HDFC AMC with a target price of INR3,170, premised on 42x FY28E Core EPS.