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Traction in MF AUM, non-MF products to aid revenue

About the stock: CAMS is a mutual fund transfer agency. It provides technologydriven financial infrastructure & services to MFs and other financial institutions.

* Largest registrar and transfer agent (RTA) of MFs with ~70% market share

* It has consistently operated with high (>30%) margins and return ratios

Q1FY22 Results: CAMS reported a steady sequential performance.

* Revenue from operations up 35% YoY to | 201 crore, led by growth in AUM

* EBITDA up 48.5% YoY at | 97.4 crore; margins up at 70 bps YoY at 47.4%

* PAT was at | 63.2 crore (up 58.7% YoY) with margins at 30.74%.

What should investors do?

CAMS’ share price has grown by ~2.5x over the past nine months (from ~| 1300 in November 2020 to ~| 3,250 in August 2021). Sustainable growth opportunity & market leadership remains positive though richly valued

* We maintain our BUY rating on the stock

Target Price and Valuation: We value CAMS at ~56x FY23E EPS and revise our target price from | 2800 to | 3500 per share.

Key triggers for future price performance:

* Structural growth opportunity in relatively under penetrated market

* Technological expertise, long standing client relation and market leadership remains a key business strength

* Gradual pick up in non-MF business & scheduled launch of new products to aid revenue growth and diversification

* Steady growth & consistent elevated margin to aid valuation.

Alternate Stock Idea: Apart from CAMS, in our coverage we also like Nippon Life.

* It offers a play on under-penetrated asset management industry coupled with strong distribution and focused approach on active & passive AUM

* BUY with target price of | 480

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