Add Computer Age Management Services Ltd For Trgaet Rs 2,600 - Yes Securities
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Softness in yield, margin and AUM growth
Result Highlights
* Asset-based Mutual Fund Revenue: Asset-based mutual fund revenue was up 1.4% QoQ and 4.5% YoY to Rs1.87bn, broadly mirroring the AAUM serviced by CAMS, which was up 2.6% QoQ and 4.1% YoY.
* Non-Asset-based Mutual Fund Revenue: Non-asset-based mutual fund revenue fell -1%/-8.8% QoQ/YoY, driven lower YoY by drop in transaction revenue and lower NFO revenue during the quarter.
* Non-Mutual Fund Revenue: Non-mutual fund revenue fell/rose -3.9%/4.2% QoQ/YoY, driven YoY by strong growth in AIF business and CAMSPAY
* Operating profit margin: Calculated Operating EBITDA amounted to Rs 1,082mn for the quarter, translating to an EBITDA margin of 44.4%, up 66 bps QoQ
Our view – Softness in yield, margin and AUM growth
Calculated revenue yield inched lower on both YoY and QoQ basis despite rise in share of equity in AUM: Share of equity in AUM serviced has risen 558 bps YoY and 138 bps QoQ to 46.4%. The calculated revenue yield for the quarter stands at 3.50 bps, lower by 0.06 bp YoY and 0.07 bp QoQ. Telescopic pricing has a role to play in this erosion in yield wherein the rise in fees is about 75-80% of the rise in AUM serviced.
The AUM growth environment is relatively challenged with debt mutual funds losing out to bank deposits and equity inflows seeing a weakening trend: Even with sequential growth of 2.6% in AUM serviced, the YoY growth stood at 4.1%. Controlling growth in AUM serviced is largely beyond the scope of CAMS, with relatively stable market share, while operating in an growth environment that is relatively challenged.
Management reiterated EBITDA margin guidance of 43-44%: The company will continue to invest in new businesses and will have to factor in wage inflation. At the same time, new businesses will start to contribute, going forward.
We downgrade CAMS from ‘Buy’ to ‘Add’ with a revised price target of Rs 2600: We value CAMS at 39x FY24 P/E.
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