Portfolio managers believe despite premium valuations and the run-up in price, investors could accumulate shares of HDFC Asset Management.

Analysts said with higher sustainable operating profits the stock could be re-rated.

The stock moved up 9 per cent to Rs 2,170 in the last couple of trading sessions, after the quarterly numbers, where profits grew 42 per cent.

Over the last six months, the share price has gained 46 per cent. “Asset management business has a huge operational leverage.

It is a business of credibility, where the HDFC group and company score high,” says Alok Ranjan, head (PMS), way2Wealth.

He recommends investors accumulate the stock for the long term. The asset manager continued to retain its number one position and market share (from 13.2 per cent to 14.7 per cent) in overall assets under management and maintained its market share in the more profitable equity space.

It gained share in the liquid fund category, a preferred choice for many corporate investors who fled to safety in the aftermath of the IL-FS crisis. Phasing out of upfront commissions, which are now replaced with trail commissions, and lower employee expenses during the quarter helped improve operating margins for the company. “At a time when most companies are going through competitive pressures, this asset manager saw operating profit margin increase in the quarter from 37 basis points to 42 points and this looks sustainable, which is a big positive,” said a research analyst at a domestic brokerage house.

He advises investors to accumulate the stock. In a note to investors, JM Financial raised its earnings estimates by 12 per cent / 13 per cent for the next couple of years on account of building a higher operating profitability of 41bps in FY20E / FY21E compared to 37 basis points earlier.

It has a revised target price to ?2,200.