Prabhudas Lilladher Initiates Coverage on UTI Asset Management Company, Sets Price Target at Rs 975
UTI Asset Management Company Experiences Weak Quarter, Adjusts Outlook
The research report by Prabhudas Lilladher on UTI Asset Management Company has highlighted a weak quarter for the company, with core Profit After Tax (PAT) missing projected levels by 11.5%. This underperformance is attributed to two primary factors: a lower revenue base due to a shift in mix towards exchange-traded funds (ETFs), and higher operational expenses (opex) driven by other opex.
The management has provided guidance on post-VRS (Voluntary Retirement Scheme) staff costs, indicating that quarterly staff expenses could range between INR 1.25 billion and INR 1.30 billion. Additionally, other opex is expected to grow by 10% primarily due to increased technology spending and geographic expansion. In response to the 5 basis points (bps) increase in Total Expense Ratio (TER), UTI Asset Management plans to pass on this impact to intermediaries.
Adjusted Estimates
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In light of these developments, Prabhudas Lilladher has increased the company's operational expenses for FY27/28E by 5.3% and 7.9%, respectively. Consequently, core PAT has been reduced by an average of 10.5%. These revisions have a bearing on the company's earnings per share (EPS) and, subsequently, its target price.
Outlook and Recommendations
Despite maintaining a multiple of 13x on Mar'28 core EPS, Prabhudas Lilladher has adjusted its target price to INR 975 from INR 1,125. This change in target price is a direct result of the earnings cut. The research firm has also shifted its rating to 'HOLD' from 'BUY'.
| Metric | Original Estimate | Revised Estimate |
|---|---|---|
| Opex Growth (FY27/28E) | - | 5.3% / 7.9% |
| Staff Cost (INR bn) | - | 1.25-1.30 |
| Core PAT Reduction (Avg.) | - | 10.5% |
| Target Price (INR) | 1,125 | 975 |
| Rating | BUY | HOLD |
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Investor Takeaway
Investors should be cautious with UTI Asset Management Company due to a weak quarter and earnings cut.
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