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Revenue and margin evolution healthy for now

Our view – Strong growth in both MF and non-MF segments sustained

Asset-Based Mutual Fund Revenue– Asset growth remained strong and yield was broadly stable: Asset-based mutual fund revenue was up 10.7%/32.7% QoQ/YoY to Rs 2.68bn, lagging growth in AAUM serviced by CAMS, which was up 12.3% QoQ and 39.2% YoY. The revenue yield was largely stable during the quarter, where the adverse impact of telescoping pricing was negated by higher share of Equity AUM.

Non-Mutual Fund Revenue – Strong growth in Non-mutual fund revenue was maintained: Non-mutual fund revenue rose 7.0%/31.9% QoQ/YoY, driven sequentially by growth in AIF, CAMS Pay and CAMS KRA. The contribution of non-mutual fund revenue was at 12.9%, down -40bps QoQ but flat YoY. CamsPay registered a 69% YoY growth and around 50-60% of its revenue contribution is from mutual funds. The CAM KRA revenue grew by 56% YoY and now contributes 3.9% to total revenue.

Operating Expenses – Operating expenses rose sequentially due to increments and direct expenses: Employee expense was at Rs 1,186mn, up 4.8%/21.4% QoQ/YoY. The YoY increase was driven by new hirings and increments. The company has granted ESOPs in 3Q to employees, which would have an incremental ESOP cost of around Rs 40mn for FY25. Other Opex was at Rs 764mn, up 11.4%/38.2% QoQ/YoY. The YoY increase in other expenses was largely driven by direct expenses. Variable expenses, excluding out-of-pocket expenses, are 8-8.5% of revenue and should not change a lot going forward.

We maintain ADD rating on CAMS with a revised price target of Rs 4800: We value CAMS at 43x FY26 P/E at which CAMS would trade at 18.5x FY26 P/B.

Other Highlights (See “Our View” above for elaboration and insight)

* Non-Asset Based Mutual Fund Revenue: Non-asset-based mutual fund revenue rose 10.5%/34% QoQ/YoY, driven by transaction, NFO and call center revenue.

* Operating profit margin: Calculated Operating EBITDA amounted to Rs 1,702mn for the quarter, translating to an EBITDA margin of 46.6%, up 141bps QoQ.

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