Add Computer Age Management Services Ltd For Target Rs.2450 - Yes Securities
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Result Highlights
* Asset-based Mutual Fund Revenue: Asset-based mutual fund revenue was down/up -0.2%/3.3% QoQ/YoY to Rs1.87bn, lagging the growth in AAUM serviced by CAMS, which was up 0.7% QoQ and 4.9% YoY.
* Non-Asset-based Mutual Fund Revenue: Non-asset-based mutual fund revenue rose/fell 5.4%/-5.0% QoQ/YoY, driven higher QoQ by increase in billing done in allied services such as MF central, other application services, etc.
* Non-Mutual Fund Revenue: Non-mutual fund revenue rose18.6%/7.7%QoQ/YoY, driven YoY by strong growth in AIF business and CAMSPAY
* Operating profit margin: Calculated Operating EBITDA amounted to Rs 1,091mn for the quarter, translating to an EBITDA margin of 43.8%, down -66 bps QoQ
Our view – Yield inches lower, AUM growth sluggish
There was an erosion of yield amounting to 0.02 bps on sequential basis: The revenue yield for the quarter was 2.72bps. Telescoping pricing played a role in eroding yield since a couple of players merged causing their AUM to move above thresholds. There was also some negative impact due to price re-negotiation.
AUM growth was sluggish but management put in somewhat positive commentary: A couple of large mutual funds are having a build-up in rankings and one would have to see what impact that would have on equity inflows for CAMS. While non-liquid debt MF business in March was expectedly strong due to intense sales activity, it has remained strong in the first 5 weeks of the current quarter
The Insurance Repository business awaits favourable regulation to enhance the opportunity size: The company expects pricing to erode due to competition, which would lead to an industry opportunity size of Rs 1.5-2.5bn, depending on the extent of price erosion.
We maintain a less-than-bullish ‘Add’ rating on CAMS with a revised price target of Rs 2450: We value CAMS at 38x FY24 P/E at which CAMS would trade at 13.4x FY24 P/B.
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