Computer Age Management Services - Emergence of 'multiple' business lines - HDFC Securities

Mr. Krishnan ASV, Institutional Research Analyst, HDFC Securities

CAMS printed in-line revenue/PAT at INR2bn/INR601mn, as MF AAAUM market share increased 130bps YoY to 70.1%. As a market leader in a duopoly RTA market with an MF MAAUM market share of 71.2% (incl. FT AMC), CAMS is a play on India's growing asset management industry. Significant entry barriers coupled with customer stickiness places the firm in a uniquely advantageous position. We expect FY21-23E revenue and operating profit (OP) CAGR of 15.1/19.1%, which is expected to be driven by a resurgence in flows and better performance of nascent businesses i.e., payments, AIF, and insurance. We assign a 10% premium to our derived DCF-based multiple (32.3x) on the back of growing confidence in the non-MF business. After the recent sharp run-up in the stock (+31% vs. 15th Apr 21), we downgrade the stock to REDUCE with a revised target price of INR1,980. The stock is currently trading at FY22E/23E EV/NOPLAT of 50.7/43.8 and P/E of 42.9/43.2x.

4QFY21 highlights: Revenue was broadly in line at INR2bn (+14.3/7.4% YoY/QoQ). Lower operating expenses were partially offset by higher other expenses, resulting in core operating profit of INR767mn (+20/11% YoY/QoQ, -1.8% vs. estimates). Lower-than-estimated treasury income at INR42mn (-13.4/-34.9% YoY/QoQ) resulted in an APAT of INR601mn (+39.6/6.6% YoY/QoQ).

Revenue yields under pressure: CAMS' MF FY21 AAUM market share rose 130bps to 70.1%, resulting in MF AAUM at INR20trn. Despite the share of equity improving in the mix (+140bps QOQ), derived MF revenue yields contracted 0.1bps sequentially, indicating pressure on yields. Non-asset- based revenues grew 20.9/2.2% YoY/QoQ as the number of transactions picked up further. Management highlighted that on-boarding of FT AMC has been delayed and is expected to transition in the next 4-5 weeks. The company also signed an LOI with ~15 entities for CAMSFinserv account aggregator business.

Outlook: We are constructive on FY22E in terms of our expectations around flows and FT AMC beginning to contribute to revenues (1HFY22 onwards).

Source : Equity Bulls

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