ICICI Prudential AMC vs HDFC AMC stock: How shares of industry leaders compare against each other

Shares of HDFC Asset Management Company are likely to deliver more returns than industry peer ICICI Prudential Asset Management Co, says Kotak Institutional Equities. According to Kotak analysts, AMCs are facing sharply weaker trailing returns despite resilient retail active equity inflows, alongside a relatively benign medium-term regulatory environment. 

However, the sector requires investment in new growth avenues such as alternatives, offshore products and distribution capabilities.

Industry leaders, with robust fund performance, look better placed to record a higher share of flows. Even as sector valuations have fallen, they continue to trade at a premium to broader markets.

Kotak Institutional Equities has initiated coverage on ICICI Prudential AMC. It assigned an 'Add' rating and a 12-month price target of Rs 3,150, signalling a 11% upside over the previous close.

Its peer HDFC AMC received a 'Buy' rating from Kotak with a revised target price of Rs 2,750 from Rs 3,000 following recent fall. The fresh target still implies an upside potential of 17% upside.

ICICI Prudential AMC

The business is set to deliver steady AUM and earnings growth, backed by a large systematic book, a strong hybrid franchise and a growing higher fee alternatives platform. The company has a consistent long-term track on most operational and financial metrics.

"While we like the long-term franchise strength, current valuations limit a more bullish stance on the stock," Kotak analysts said in a note.

The ICICI Prudential AMC stock is up 11% this year and gained 8.23% in two weeks. The AMC stock closed 2.33% higher at Rs 2910 in the current session. Market cap of the firm stood at Rs 1.43 lakh crore. 

HDFC AMC

In case of HDFC AMC, analysts said HDFC AMC's valuations have turned more comfortable, attracting a constructive stance on the stock. They expect a 16-17% core earnings CAGR over the next two years, led by an estimated 20% AUM growth, partly led by 3% annual fee fall, with marginal benefits from operating leverage.

On an operational front, HDFC AMC is likely to continue benefiting from strong fund performance. On the other hand, analysts account in lower absolute flows in FY27-FY28 compared with the last financial year. In the medium term, building of credible growth drivers in alternatives is a priority to help offset ongoing fee pressure and rising costs, the brokerage said.