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* Steady revenue growth:

CMS’ total revenue grew +19% YoY/+7% QoQ to INR 5.8bn (4% above JMFe) driven by strong growth in managed services (+36% YoY/ 17% QoQ) while cash management (CM) segment grew 11% YoY (+ 4% QoQ, in line with JMFe). The steady growth momentum supports the management’s revenue guidance of INR 25- 27bn for FY25E (CAGR of c.17-18% over FY23-25E). Gross profit grew 12% YoY (+3% QoQ), while gross margin contracted 380bps YoY/ 220bps QoQ on account of higher mix of product revenue. EBITDA grew 11% YoY (-4% QoQ, 1% below JMFe) while PAT grew 15% YoY/ +3% QoQ to INR 871mn (1% above JMFe). The company has now guided to grow by 17-19% in FY24 and have total revenue of INR 22.5bn-23bn for FY24.

* CM continues to climb well:

CM EBIT grew 14% YoY/+2%QoQ to INR 976mn in 3QFY24 while EBIT margin improved 80bps YoY (-40bps QoQ) to 26.0% on the back of efficiencies. Route compliance for ATMs touched 85% while cassette swap implementation stood at 15% in 3QFY24 and is expected to reach 25% by 4QFY24. During the quarter, the company added 4k business points (10% YoY) for cash logistics business to 133k (+16% YoY/+3%QoQ). The management expects medium-term growth in this segment of 10-13% YoY.

* MS segment see sharp upswing:

MS EBIT grew +20% YoY/+4% QoQ to INR 376mn and margin contracted 240bps YoY/220bps QoQ to 17.7% on account of higher mix of product sales. The company’s AIoT and remote monitoring services won a mandate for ALGO AIoT remote monitoring solution for 2K new sites. In the MS business, the company won orders of INR 6bn (INR 12.5bn in 9MFY24), taking the total order book of INR 44bn (to be executed over next 3-5 years).

* Maintain BUY:

We tweak our FY24-26 estimates and arrive at Mar’25TP of INR 490, basis 17xMar’26EPS. CMS remains on a strong footing given its robust business model (significant market leadership in the CM segment, strong track record of diversification and strong earnings growth and return profile (FY25E RoIC >40%). Sharp reduction in cash in circulation and delay in compliance implementation remain key risks to our call.

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