Date- 05.11.2019
CMP - 334
Reliance Nippon was a joint venture between Anil Ambani's reliance capital and Japan's Nippon life. In september this year nippon decided to buyout reliance's stake in Reliance nippon life and hence was renamed as Nippon life. The main business is asset management ( Nippon India mutual fund). Due to the high debt profile of ADAG group the stock never got the valuation it deserved and even hit the 52 wk low of Rs 127.8 while its direct compatriot HDFC AMC was trading at all highs of Rs 3000 due to its parentage. Now with Reliance having quit this business and its now basically a MNC it should rocket up. Some stats which should prove my point about the business.
Nippon life market share -8.5% (dropped from 12%)
HDFC AMC market share -16%
Distribution channel
Nippon life - 52000 active advisers
HDFC AMC - 65000 active advisers
In the recent interview by the nippon management they clearly stated that their main mission is to make profit more than the market cap, secondly they said that their company policy is to give back 60-90% profits back as dividends. There was a recent news few years back regarding the distribution cost of AMC's, nippon life in this regard said that no distributor is more than 4% of the business so that enough diversification is there.
In India as a whole only 2% of the population invests in mutual funds so future prospects are pretty bright and young generation is also interested in investing in this form.
Fundamental Check:-
Nippon Life HDFC AMC
EPS 8.36 55.48
P/E 41.33 53.07
B/V 42.89 160.54
P/B 8.05 18.34
The comparison itself tells the huge valuation gap between the two stocks and going forward gap should be narrowed. Target price going forward for next 2 years holding period should be in range of Rs 550-600.
Happy Investing
ReplyDeleteThanks for sharing valuable information.
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