Add Computer Age Management Services Ltd Rs. 4,450 By Yes Securities
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Strong growth outlook but largely priced in
Our view – Both MF and non-MF segments see strong revenue growth
Asset-Based Mutual Fund Revenue– Robust growth in underline assets but yields were broadly stable: Asset-based mutual fund revenue was up 7.7%/26.8% QoQ/YoY to Rs 2.42bn, lagging the growth in AAUM serviced by CAMS, which was up 8.3% QoQ and 34.3% YoY. The company has mentioned that sequentially the yield during the quarter was stable with depletion of less than 1%.
Non-Mutual Fund Revenue – Strong growth in Non-mutual fund revenue was maintained and its share in revenue to further inch higher: Non-mutual fund revenue rose 4.8%/30.7% QoQ/YoY, driven sequentially by growth in CAMSPay, CAMSKRA and other revenue. The contribution of non-mutual fund revenue was at 13.3%, up by 40bps YoY. The company expects that non-MF revenue could grow by mid to high 20s for coming 1-2 more quarters. The company would also endeavour to increase the share of non-MF based revenue by 2% points every year and take it to 20% in coming 3 years.
Operating Expense – Operating expense rise sequentially due to increments and direct expenses: Employee expense was at Rs 1,130mn, up 7.8%/19% QoQ/YoY, driven on YoY basis by annual increments and additional hirings. Other Opex was at Rs 686mn, up 10%/21.9% QoQ/YoY, driven YoY largely by direct expenses. CAMS has initiated a project to move its mutual fund-based RTA business to cloud. It will take 4-5 years to complete the project. The net impact of this initiative would be around 0.5% on profitability in the initial period till efficiencies start to accrue. We maintain ADD rating on CAMS with a revised price target of Rs 4450: We value CAMS at 43x FY26 P/E at which CAMS would trade at 17.6x FY26 P/B. (See Comprehensive con call takeaways on page 2 for significant incremental colour.)
Other Aspects (See “Our View” above for elaboration and insight)
* Non-Asset Based Mutual Fund Revenue: Non-asset-based mutual fund revenue rose 3.7%/23.4% QoQ/YoY, driven by transaction revenue and call center revenue.
* Operating profit margin: Calculated Operating EBITDA amounted to Rs 1,498mn for the quarter, translating to an EBITDA margin of 45.2%, down -97bps QoQ.
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SEBI Registration number is INZ000185632.
