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FY25 a slow year; hopes pegged on FY26

4Q and FY25 were fairly weak for CMS Info Systems, revenue declining 1% YoY in 4Q and growing a mere 7% in FY25. PAT followed similar trends and registered a 7% YoY growth, both for 4Q and FY25. For the cash management business (+7/8% in 4Q and FY25), this was owing to an overall slowdown in consumption, while for the managed services vertical (- 5/11% in 4Q/FY25), weakness was due to an industry-wide disruption at a major competitor. The positive was a 200bps gain in cash management market share. With the situation slowly stabilizing, management expects execution of the managed services order book, although delayed, to be completed by Sep’25. This gives them confidence of FY25-27E revenue CAGR of 14-17% in the services business, of which cash management is expected to grow 10-13% and managed services at ~25%. We cut our FY26/27E EPS estimates by 3-4%, and maintain BUY with a revised target price of INR 550 (INR 555 earlier), at 20x Mar’27E EPS.

* 4Q a miss on account of weak revenue performance: 4QFY25 consolidated revenue at INR 6.2bn was down 1% YoY and, 8% lower than our estimate. While cash management grew in line with expectations (INR 4.1bn, +7% YoY), managed services shrank (INR 2.3bn, -5% YoY). EBITDA at INR 1.6bn, +4% YoY, was 11% below estimate. Growth in EBITDA despite negative revenue growth was due to a YoY uptick in gross margin (90.3% vs. 86.8%); aided by a better product mix. EBITDA margin at 26.2%, +140bps YoY, but was 60bps below our expectations, on the back of higher thanexpected operating expenses despite improvement in gross margin. 4Q PAT at INR 976mn, grew 7% YoY, but was 8% lower than estimate of INR 1bn.

* Order book execution key focus in FY26; this should drive growth in MS business: CMSINFO executed only 52% of the order book as on the start of FY25; below expectation of 60%. This was due to large banks being severely affected by disruption in their ATM operations, due to issues at a key competitor. Management expects to complete those orders by end-Sep’25. In FY25 CMS won orders worth INR 12bn+, 60% of which came from private banks (inherently lower turnaround time than PSU banks).

* Building with Vision AI (Remote monitoring platform): Tech enabled vision AI platform is rapidly scaling and has become the number one platform in India’s ATM space. The newly built in-house proprietary tech stack has helped CMS in building multiple AI modules which play a key role in winning mandates with leading banks for their branch network. Further, to diversify away from their heavy reliance on the BFSI space, CMS has also developed use cases in Non-BFSI areas such as retail and QSR outlets, warehouses and dark stores, and EV charging docks.

* The way forward: Management guided for FY25-27E revenue CAGR of 14-17% for services, split into 10-13% for cash management and 25-30% for managed services. The company aims to pivot to longer-term contracts (7-10 years) for a more predictable revenue stream. While management refused margin guidance, it indicated that it would consider 25% RoCE a prerequisite on new business wins.

Key takeaways from conference call Outlook for FY26 and FY27

* Revenue and margins: Management guided for FY25-27E revenue CAGR of 14-17% for services, split into 10-13% for cash management and 25-30% for managed services. The company aims to continue shifting to longer-term contracts (7-10 years) for more predictable revenue streams. While management refused to give margin guidance, it indicated that it would consider a 25% RoCE a prerequisite on new business.

* Capex: Capex for FY25 was ~INR 1.3bn, significantly lower than the guidance of INR 3bn+. Considering the large unexecuted order book capex will remain as guided earlier, at INR 2bn annually, albeit should be higher for FY26 at INR 3-3.2bn Order Book

* Executable order book as of end FY25 stood at INR 14bn. Through FY25, the Company won incremental orders to the tune of INR 12bn, of which in H2FY25, there were significant order wins (INR 8bn), and INR 5bn in Q4.

* The execution was impacted by delays due to disruptions at a key competitor delay in approvals from banks, since they prioritized freeing cash lying in the hands of the disrupted service provider.

* Ended the year with 52% order execution, short of the 60% target. Out of the INR 12bn orders won in FY25, 60% came from private banks and management expects to complete the remaining 48% of the FY25 order book by Sep’25, aided by faster execution with private sector banks.

Competitor disruption

A key competitor faced liquidity issue, leading to disruptions in ATM operations which created a need for CMS to assist banks in managing ATM cash evacuation and operational continuity. CMS leveraged this disruption to win end-to-end managed services contracts from large banks. Hence banks are considering refreshing or expanding their ATM estates, offering further opportunities for CMS.

Scouting M&A opportunities

The company screened 65 companies in FY25 for potential acquisitions. Future M&A activity will prioritize alignment with CMS’s growth and ROCE objectives.

Retail cash management as massive opportunity

Of India’s 3 million retail touch points, only 550K+ are organized, with one-third outsourced for cash logistics. This represents a massive untapped market. CMS’s 360-degree retail solution integrates cash logistics, AIoT-based monitoring, and real-time settlement processes. Key sectors include fuel, automotive, government, e-commerce logistics, and healthcare.

Vision AI – remote monitoring offering

* The Vision AI platform (CMSINFO’s remote monitoring offering) has an aggressive goal of growing from the current 30,000 sites to 50,000 in the near term. The overall software business which is 7% of the revenue should cross 10% of the revenue by FY27E.

* Focused on deploying AI-driven monitoring for both ATMs and bank branches, which remain under-penetrated (<20% adoption of monitoring solutions).

* The proprietary tech stack with AI modules enables proactive incident prevention, enhancing client satisfaction and operational efficiency. CMS has on boarded quick commerce clients for its Vision AI platform, particularly for dark store monitoring and operational efficiency.

* Pilots are underway for fleet monitoring, ambulance management, and in-store AIoT integration. The offers a unified command and control platform to ensure compliance, hygiene, and efficiency at dark stores.

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