Prudent Corporate Advisory Services

Nov 1, 2023

ICICI Securities recommended reduce rating on Prudent Corporate Advisory Services with a target price of Rs 1216 in its research report dated October 29, 2023. Broker Research Reduce Prudent Corporate Advisory Services (Prudent) has progressed well in terms of AUM growth aided by MTM, traction in SIP and growth in MFDs. AUM/SIP book/MFD count clocked CAGRs of 28%/23%/37% between FY19–FY23 and grew by 23%/15%/5% in H1FY24. This has led to elevation in distributor rankings. Possible cost pressure on margins from elevated marketing costs and lower yields due to stoppage of B-30 incentive had led us to downgrade the stock to HOLD during Q1FY24 (Link) – we maintain our rating. Possible upside risks from continued traction in SIP (50% of client base is yet to have a SIP scheme) and spike in insurance cross-sales. Higher mix of equity within AUM (93.7%) lends higher growth potential for Prudent compared to other AMCs. Any MTM fall in AUM pose downside risk. Outlook We expect FY24/25 yields of insurance premiums at 20% compared to 21% in H1FY24. We estimate total opex at INR 5.8bn/7bn for FY24E/FY25E (INR 2.8bn in H1FY24), leading to 27% EBITDA CAGR during FY23–FY25E. We now value the stock at INR 1,216 (earlier INR 1,102) based on 25x FY25E adjusted EPS (adjusted for goodwill amortisation) of INR 49 (earlier INR 44). Upside/downside risks are favourable/adverse movement in AUM as well as net yields.