HDFC AMC Q1 Review: Why Analysts Like The Numbers But Warn On Costs

HDFC Asset Management Company posted a robust earnings result for the first quarter of FY26, with both Morgan Stanley and Jefferies highlighting common themes—healthy AUM growth, strong revenue yields, and upside potential in earnings. While both brokerages acknowledged the company’s strong operational performance and boost from investment income, they also raised concerns over valuations and potential cost pressures going forward.

The asset manager reported a 24% year-on-year rise in net profit to Rs 748 crore for the quarter ended June 30, up from Rs 604 crore in the same period last year. Revenue from operations grew 25% to Rs 968 crore, while average assets under management surged to Rs 8.3 lakh crore, marking a 23% year-on-year increase.

Morgan Stanley termed the quarter “good,” noting that HDFC AMC’s PAT beat its estimates by 7% and exceeded consensus by 9–10%, boosted by higher investment income and better-than-expected revenue yields.

“Operating profit was in-line with our estimates, though revenue yields were better as benefits from its FY25 commission rationalisation efforts likely continued to play out,” the brokerage said.

Its revised its price target upward from Rs 4,470 to Rs 4,910, citing improved yield assumptions and stronger SIP flows.

“We raise our F2026–28 PAT by 2–8% and forecast profit growth of 19% in FY26 versus 27% in FY25,” Morgan Stanley noted.

“Yield movement was favourable vs our estimates. Yields actually dipped quarter on quarter from 47.2bp to 46.9bp, still beating our estimate of 46.5bp.”

Despite the upbeat outlook, Morgan Stanley remains “Equal Weight” on the stock due to valuation concerns.

“We find valuation expensive at 35 times FY27 price per equity, though this could hold in the short term owing to strong investor sentiment.”

Jefferies maintained its “Buy” rating and raised its target price from Rs 5,000 to Rs 6,100, citing strong AUM growth and better-than-expected core revenues.

“HDFC AMC’s profit of Rs 748 crore, up 24% YoY, was ahead of estimates aided by tad better core revenues and higher other income,” Jefferies said in its note.

The brokerage highlighted the company’s steady SIP flows and strong inflows into debt and liquid schemes, supported by a favourable monetary policy.

“Equity assets were up by 12% quarter-on-quarter reflecting market rebound and decent inflows. Its market share in equity QAAUM was largely stable at 12.8%.”

Jefferies also flagged upcoming non-cash costs related to ESOPs and PSUs, which could impact earnings growth from Q2 onward.

“This non-cash cost drives ~10–15% rise in opex assumptions, but employee costs are still relatively lower at ~6bps of AAUM.”

Looking ahead, Jefferies projects a 16% compound annual growth rate in operating profits over FY25–28, supported by a 23% CAGR in AUM.

“We retain our 'Buy' rating… moderate other income will limit earnings growth to 15%, but long-term fundamentals remain strong.”