Buy Aditya Birla Sun Life AMC; target of Rs 1160: Motilal Oswal

Moneycontrol • 10 days ago

Original source

Key Investment Pillars

  • Aditya Birla Sun Life AMC's (ABSLAMC) operating revenue grew 5% YoY, driven by a 4% YoY growth in overall MF QAAUM, with equity, liquid, and ETF QAAUM growing 8%, 17%, and 36% YoY, respectively.
  • The company's alternatives business is scaling up, with total alternate AUM growing 19x YoY to ~INR6.6b, and PMS/AIF QAAUM surging 24x YoY to INR6.5t.
  • ABSLAMC's retention ratio has increased to ~25-30% from 4-5% historically, driven by better performance and the ability to redirect investors to other schemes.
  • The company has a strong distribution network, with MFDs contributing 52% of flows, followed by national distributors and banks.

Thesis Validation Checklist

  • Investors should watch for sequential improvement in core funds, monthly SIP trends, and growth in alternatives business.
  • The company's ability to maintain its retention ratio and improve its distribution network will be key monitors.
  • Any relaxation in permitted economics for EPFO mandates could add a few basis points to profitability.
  • The company's employee costs are expected to remain broadly at current levels, and the newly launched ESOP scheme is expected to have an annual impact of INR140-150m.