Motilal Oswal Recommends Buying Aditya Birla Sun Life AMC with a Target Price of Rs 1230

Aditya Birla Sun Life AMC's Quarterly Performance Reflects Slower Growth

Aditya Birla Sun Life Asset Management Company (ABSL) reported a 7% year-over-year (YoY) growth in operating revenue, reaching approximately INR 4.6 billion. However, this growth was not sustained in the current quarter, as revenue declined 4% quarter-over-quarter (QoQ) to INR 4.6 billion, which is in line with expectations.

The asset management company's management fees yielded 42.1 basis points (bp) in the quarter, down from 44.9 bp in the same quarter last year and 43.1 bp in the previous quarter. For the fiscal year 2026, ABSL's revenue grew 10% YoY to INR 18.5 billion. Total operating expenses (opex) increased 4% YoY to INR 1.9 billion, resulting in a cost-to-income ratio of 41.9% in the fourth quarter of fiscal year 2026, compared to 43.1% in the same quarter last year.

The earnings before interest, taxes, depreciation, and amortization (EBITDA) for ABSL grew 9% YoY but declined 8% QoQ to INR 2.7 billion, missing the market's expectations by 5%. The EBITDA margin for the quarter stood at 58.1%, up from 56.9% in the same quarter last year and slightly below the management's estimate of 59.5%.

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Outlook and Recommendations

The research team has decided to largely retain their earnings estimates for fiscal years 2027 and 2028, taking into account the expected slower growth in assets under management (AUM) that will weigh on revenues. However, this is partly offset by the stable cost structures. As a result, the team maintains a BUY rating for ABSL with a target price of INR 1,230, based on a valuation of 36 times the estimated core price-to-earnings ratio for fiscal year 2028.