Buy Computer Age Management Services Ltd for the Target Rs.4,900 by Motilal Oswal Financial Services Ltd
Yields largely reset; trajectory expected to stabilize
* CAMS reported operating revenue of INR3.5b in 1QFY26 (6% miss), up 7% YoY, driven by a 9% YoY growth in MF asset-based revenue to INR2.6b.
* Total operating expenses grew 10% YoY to INR2b (in-line). Employee expenses/other expenses rose 8%/13% YoY to ~INR1.2b/INR774m. EBITDA increased 3% YoY to INR1.5b, reflecting an EBITDA margin of 43.6% (vs. 45.2% in 1QFY25 and our estimate of 45.5%). Management guides for margins to sustain at over 45%. ? PAT grew 1% YoY to INR1.1b (10% miss) in 1QFY26, driven by the lower topline growth.
* Yield compression of ~4-4.5% in Q1FY26 was primarily driven by the repricing of a large client (75% of the impact). With ~90% of this repricing now factored into the base, management expects full-year yield decline to be at ~9% YoY, post which the trajectory should normalize to 3-3.5% due to the telescopic pricing impact. Management guides that no material repricing events are expected over the next 18-24 months. Further, newly onboarded AMCs are unlikely to exert meaningful pressure on yields, given their limited AUM contribution.
* We have cut our earnings estimates by 4%/3% for FY26/FY27 to factor in the decline in yields, as guided by the management. We expect revenue/EBITDA/PAT to post a CAGR of 9%/10%/11% over FY25-27. We reiterate a BUY rating on the stock with a one-year TP of INR4,900, premised at a P/E multiple of 42x on FY27E earnings.
CAMSPay, CAMS Alternatives, and CAMSKRA driving non-MF growth
* MF QAUM grew 21% YoY and 7% QoQ to INR48.7t in 1QFY26, with a market share of ~68%. The share of Equity AUM grew to 54.8% in 1QFY26 from 53.3% in 1QFY25 and 54.4% in 4QFY25. Equity AUM rose 24% YoY to INR26.7t.
* Transaction volumes increased 28% YoY to 244.3m, with SIP transactions up 34% YoY to 203.3m. Live folios grew 24% YoY to 97.3m.
* MF segment’s revenue grew 7% YoY to INR3.1b, contributing ~87% to total revenue. MF asset-based contributions accounted for ~74.3% of total MF revenue, while non-asset contributions made up ~12.7%.
* Management continues to guide scaling non-MF revenue contribution to ~20% over the next three years (vs ~13% currently), driven by a 25% YoY growth trajectory. Key growth levers include profit-accretive segments such as KRA, CAMSPay, and AIF, while the insurance business is approaching breakeven.
* Currently, non-MF EBITDA margins stand at ~12%, with scope to expand to 25-30% as the segment scales up. The MF business continues to deliver healthy margins of 45%+.
* CAMS Alternatives continued to solidify its leadership position, driven by strong signings (50 new mandates in 1Q—including three from the GIFT CITY). Revenue grew 11% YoY and services asset size stood at INR2.7t in 1QFY26.
* CAMSPay posted 26% YoY growth in volumes but experienced 18% QoQ decline due to seasonality in insurance volumes (4Q has a higher base), delays in the golive of the payment gateway, and slower execution in client migration.
* Management guides a rebound in volumes for the payment’s business from 2Q onwards, with revenue expected to pick up as the company focuses on diversifying its streams. The segment mix stands at 50-55% MF and 45-50% nonMF, with the MF share expected to decline to 40% as diversification progresses.
* CAMS KRA’s revenue declined 39% YoY, in line with market trends, due to lower account openings. However, volumes picked up in Jul’25. The recent acquisition of NSE Data Analytics’ KRA business added 1.3m KYC records. The KYC mix between brokers and AMCs stood at 30:70.
* CAMSRep witnessed strong momentum in policy additions, posting a 41% YoY growth to ~12m and maintaining a market share of >40%. LIC is expected to go live in 2QFY26, which should further accelerate the policy addition run rate.
* Other income came in at INR131m vs. INR117m in 1QFY25.
* Total expenses came in at INR2b vs. INR1.8b in 1QFY25. CIR stood at 56.4% vs. 54.8% in 1QFY25 and 54.4% in 4QFY25. Management expects overall expenses to grow at 10-11% YoY.
* Employee costs/other expenses rose 12%/27% YoY (in line) to INR1.2b/INR790m. Management guides that employee costs will remain in a similar range, as no major hirings are expected going forward, while other operating expenses were higher due to the recording of AMC renewals.
Key takeaways from the management commentary
* Management guides that no further impact on top-line, EBITDA, and PAT is expected, as the repricing of the major customer is 90% complete.
* CAMS plans ~INR600m in regular capex (INR150m spent in 1Q) to support transaction volume growth. Separately, ~INR500m has been spent on platform re-architecture (INR140m done in 1Q), with another INR1b guided for FY26 and ~INR1.25b in FY27. The first module is expected to go live by 4QFY26/1QFY27.
* Management plans to scale CAMSPay beyond mutual funds into education, hospitals, NBFCs, and card segments. The MF contribution, which stood at 50- 55% (100% two years back), is expected to decline to ~40%.
Valuation and view
* Despite near-term revenue and margin pressures, the company continues to maintain a dominant position in the MF segment, benefiting from strong operating leverage and growing momentum in non-MF verticals such as CAMSPay, CAMSKRA, CAMS Alternatives, and CAMS REP. Margins are expected to revert to above 45% EBITDA levels, and non-MF profitability is expected to improve meaningfully.
* With ~90% of this repricing now absorbed and limited further downside expected, earnings trajectory and yields are likely to stabilize from FY27 onwards.
* We have cut our earnings estimates by 4%/3% for FY26/FY27 to factor in the decline in yields, as guided by the management. We expect revenue/EBITDA/PAT to post a CAGR of 9%/10%/11% over FY25-27. We reiterate a BUY rating on the stock with a one-year TP of INR4,900, premised at a P/E multiple of 42x on FY27E earnings.
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