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3QFY24: Steady Growth at Tad Lower Margins

For 3QFY24, CMS Info reported profit of Rs871mn, up 15% YoY, with adjusted profit growth (ex-Esop cost) at a healthy 22%. Revenue growth of 19% was led by managed services, whereas growth in cash management business has moderated from 16% YoY last year to 11% now. This has diluted core margins a bit. We trim estimates & see 16% Cagr in profit over FY24-26. Buy stays as we see steady growth and cashflows over next 2-3yrs; ramp-up of RMS segment is encouraging.

Healthy top-line growth and core profit growth; ESOP drags.

For 3Q, CMS reported 19% YoY growth in revenues led by 38% growth in managed services and 11% in cash business. Growth in managed services segment was aided by new contract wins and it has won remote monitoring systems for additional 2k sites. In cash logistics business, growth was aided by 10% expansion of touch-points and rise in compliance levels at ATMs (85% now), although revenue growth has moderated from last year's levels. This led to core Ebitda growth of 16% YoY (excluding non-cash ESOPs) with margins at 28%. However, reported Ebitda was 7% lower than adjusted Ebitda, as CMS amortised cost of ESOPs, which will also stay into 2H & mildly into FY25-26 as well. Profit grew by 15% YoY, but ex of ESOP growth was healthy at 22% YoY.

Steady growth ahead, at tad lower margins.

Management was confident of growth outlook across segments. ATM segment has strong pipeline and rollout is likely to pick-up. Yet, management is focussed on managing ATMs that fully comply with new norms, which may have some impact on reported growth. Growth in managed services is likely to stay stronger contributing 40% of revenues with growth in AIoT Remote Monitoring and automation segments. However, margins in the managed services segments tends to be slightly lower and hence we trim our Ebitda growth forecasts with tad lower margins and slightly higher Esop costs

Trim estimates; Buy stays.

A pick-up in ATM rollout & outsourcing as well as ramp-up of remote monitoring system should drive growth. We trim estimates by 2-3% and expect CMS to deliver 16% CAGR in profits over FY24-26, aided by 16% revenue growth. Valuations are attractive, and we see scope for re-rating aided by healthy growth as well as cashflows. We maintain BUY call with target price of Rs460 (earlier Rs470) based on 15x Mar-26 PE & rate CMS as Buy.

CMS Info Systems: Key Metrics

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