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Buy Computer Age Management Services Ltd For Target Rs. 2319

Strong performance – Ahead of estimates

* Revenue – Revenue came at Rs.1.86bn against our estimate of Rs.1.82bn. It was a growth of 6% on YoY basis and 9% on sequential basis.

* EBITDA ‐  EBITDA stood at Rs.819mn against our estimate of Rs.779mn. EBITDA margin stood at 44% against our estimate of 43%, expanding by 446bps on YoY basis. On sequential basis, operating expenses saw a sharp jump of 20% led by normalization of the economic activities.    

* PAT – PAT came at Rs.564mn v/s our estimate of Rs.539mn, growing by 22% on yoy basis and 15% on sequential basis.

* Interim Dividend ‐  Declared an interim dividend of Rs.7.60/‐ per equity share

* Change in Estimates ‐  9MFY21 EPS stands at Rs.30 which is 72% of our FY21 estimate of Rs.42.

* Valuation – CAMS is trading at 33.6x PE of FY23 EPS.

Our view:

We remain positive on CAMS business given our house view of robust equity market performance in the years to come. Also steady market share gains with 1) FT addition and 2) consolidation of market share amongst top 10 AMCs bodes well for CAMS. Non MF businesses will gain traction over the medium term especially AIFs and the payment business (the share of which is minimal currently). EBIDTA margins reported in the current quarter are sustainable and will possibly see some expansion over the medium term. We raise our estimates to factor in 1) higher market return expectations from 12% to 15% and 2) higher EBIDTA margins. This has resulted in our EPS estimates for FY22 and FY23 increasing by 9% and 9.5% respectively. We also raise our target multiple from 35x FY23E EPS to 37x FY23E EPS leading to our 1‐year target price increasing from Rs2,000 to Rs2,319. Reiterate BUY

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