Buy Computer Age Management Services Ltd for the Target Rs 940 by Motilal Oswal Financial Services Ltd
Non-MF business delivers growth across segments
* CAMS reported operating revenue of ~INR4b in 1QFY27 (4% miss), up 12% YoY/flat QoQ, led by 9% YoY growth in MF revenue and 28% YoY growth in nonMF businesses. CAMS maintained its FY27 revenue growth guidance of ~13%.
* Total operating expenses grew 6% YoY to INR2.1b (4% below est.), with employee expenses flat YoY and other expenses up 14% YoY to INR886m. EBITDA rose 18% YoY (guided at 16% growth for FY27) to INR1.8b (4% miss). EBITDA margin grew to 46.3% (pre-price revision levels) from 43.6% in 1QFY26, supported by operating leverage and disciplined cost management.
* PAT was up 18% YoY/flat QoQ at INR1.3b (in line) with PAT margins at 32.2% vs. 30.5% in 1QFY26. PAT margins are guided to remain in the 30-31% range.
* Asset-based yields remained stable QoQ, with major pricing resets now behind. CAMS expects only a limited impact from pending AMC renewals and reiterates its long-term expectation of 2.5-3.0% annual yield compression.
* We have largely maintained our estimates, reflecting 1QFY27 performance. We expect revenue/EBITDA/PAT to post a CAGR of 11%/14%/16% over FY26-28E. We reiterate a BUY rating on the stock with a revised TP of INR940 (based on 36x FY28E P/E).
Key takeaways from the management commentary
* The SIF platform has crossed INR120b in AUM, with ~INR10b monthly net sales and ~50k investors within 10 months of launch. CAMS views it evolving into a meaningful long-term growth platform.
* With automations in place, CAMS expects 4-5% productivity gains in FY27 to drive ~100bp annual EBITDA margin expansion (up to ~150bp if execution is strong), partly offset by higher cloud and AI infrastructure costs.
* Businesses that are not yet EBITDA positive include Account Aggregator, Pension and CAMS Repository, while Think Analytics is approaching EBITDA breakeven. CAMS expects at least one of the currently loss-making businesses to become EBITDA positive on a quarterly basis during FY27.
Valuation and view
* CAMS remains well positioned to deliver healthy earnings growth, supported by stable asset-based yields, continued market share gains in mutual funds, sustained operating leverage from AI-led automation and disciplined cost management, along with the increasing contribution from high-growth non-MF businesses. Earnings visibility remains strong as pricing headwinds are largely behind, emerging businesses is expected to scale up further, and management guides for ~13% revenue growth and ~16% EBITDA growth in FY27.
* We have largely maintained our estimates, reflecting 1QFY27 performance. We expect revenue/EBITDA/PAT to post a CAGR of 11%/14%/16% over FY26- 28E. We reiterate a BUY rating on the stock with a revised TP of INR940 (based on 36x FY28E P/E).
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