IGI Logo

Strong revenue as well as cost performance

The ability to sustain market share, control costs and absence of any decline in revenue yields are key positives of Q4FY21 result for Computer Age Management Systems (CAMS). Higher AAUM and lower cost have resulted in highest quarterly EBITDA/PAT of Rs~900mn/600mn in Q4FY21. Annualisation of this run rate will itself give ~17%/19% EBITDA/PAT growth in FY22. We factor 17% AUM growth for CAMS between FY21-23 with 5%/3% decline in yields, respectively.

We maintain 44%/42.7% EBITDA margin for FY22/23E (higher than earlier estimates) to factor the improved cost performance. We now factor earnings CAGR of 16% between FY21-23E which is earnings upgrade of 9.4%/8.6% in FY22/23E. Maintain ADD with revised target price of Rs2,548 (earlier: Rs2,085) based on 45x (earlier 40x) FY23 EPS of Rs56.6.

* Increase multiple from 40x to 45x PE. Steady AUM market share (~70% for last six quarters) is largely underwriting a ~13% long term earnings growth model on a steady-state basis. This will remain the bedrock investment thesis for CAMS as an “’aggregate play”’ on Indian AUM growth with lower dependence on individual fund performance. This definitive outlook, well exhibited in FY20/21 along with superior cost performance, is leading to multiple upgrades.

* Cost print is looking steady, which is building expectations of operating leverage. The annual employee cost has now been at Rs2.6bn levels for the last three years. The other expense adjusted for one-offs has remained steady at Rs1.5bn for FY20/21. This is driven by covid-related cost savings and lower paper transactions mix. Hence, total operating cost has remained steady at Rs4.1bn for FY20/21. This is despite AAUM under management increasing from Rs15.8trn in FY19 to Rs20trn in FY21. Operating leverage will play out with higher AUM growth.

* Our revenue reconciliation exercise indicates almost steady yields for CAMS in FY20/21. While this can change with higher AUM growth ahead, the stability exhibited in FY20/21 is heartening. Steady yields have led to an increase in asset-based revenue from quarterly levels of Rs1.3bn in FY20 to Rs1.5bn in Q4FY21. Any further resilience in yields will lead to a positive surprise. We factor-in 5%/3% cut in aggregate yields in FY22/23E, respectively.

* Strong entry barriers and high market share lend a definite growth outlook. Entry barriers to MF RTA business include high technology intensity, compliance requirement, extensive branch network and already existing deep integration with the mutual fund ecosystem (industry has gone through consolidation and no MFs have migrated between RTAs). Further, CAMS offers many online services and through several mobile applications to investors, clients, distributors and channel providers. Continued development of proprietary platforms and applications has furthered its competitive technology advantage.

To Read Complete Report & Disclaimer Click Here

For More ICICI Securities Disclaimer https://www.icicisecurities.com/AboutUs.aspx?About=7

Above views are of the author and not of the website kindly read disclaimer