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Revenue yield remains stable for now, EBITDA margin surprises but guidance remains realistic

Result Highlights

Asset-based Mutual Fund Revenue: Asset-based mutual fund revenue was up 3.5% QoQ and 26.5% YoY to Rs 1.79bn, broadly in line with AAUM serviced by CAMS, which rose 4.5% QoQ and 28.4% YoY.

Non-Asset-based Mutual Fund Revenue: Non-asset-based mutual fund revenue rose 12.2% QoQ and 32.2% YoY to Rs 0.36bn, driven by transactions

Non-Mutual Fund Revenue: Non-mutual fund revenue rose 1.3% QoQ and 32.3% YoY, with AIF/PMS, Payments and Insurance repository businesses contributing

Operating profit margin: Reported Operating EBITDA amounted to Rs 10,748mn for the quarter, translating to an EBITDA margin of 45.2%, up 121 bps QoQ

Our view – Revenue yield remains stable for now, EBITDA margin surprises but guidance remains realistic

Revenue yield remained flat sequentially as rise in share of equity in AUM offset the negative impact of telescopic pricing: The share of equity in AUM serviced now stands at 41%. Yield has, in fact, been broadly flat for 7-8 quarters now.

EBITDA margin positively surprised but management was sombre in their guidance: EBITDA margin has been better than expected driven by better cost management through automation. Management stated that they continue to hold their prior guidance of EBITDA margin being in the early 40s in the favourable quarters. Non-MF initiatives moved closer to meaningful on-ground traction: The CRA business and the AA business both displayed underlying traction, providing hope.

We maintain ‘Buy’ rating on CAMS with a revised price target of Rs 3396: We value CAMS at 50x FY23 P/E for an FY21-24E EPS CAGR of 23%.

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