Buy CAMS; target of Rs 2900: Motilal Oswal

Motilal Oswal's research report on CAMS

CAMS reported a PAT of INR721m in 2QFY23, +12% QoQ but 4.7% below our estimates. A 2% miss on revenue along with a higher-than-expected tax rate resulted in a weaker-than-estimated PAT. EBITDA margin was at 43.8% (below our estimate of 45.1%) v/s 41.4%/46.5% in 1QFY23/2QFY22, respectively. Management entered into revised agreements with all but one of its major AMC customers wherein some have rolled over agreements on existing pricing, while a few have taken some cuts. Non-MF businesses particularly AIF, Insurance Repository and Account Aggregator are expected to grow at a healthy pace from FY24. We adjust our earnings to factor in the earnings miss in 2QFY23 and increased confidence of management on non-MF businesses’ growth outlook. Resultantly, we cut our EPS estimates for FY23/FY24/FY25 by 5%/4%/2%, respectively.

Outlook

Maintain BUY with a one-year TP of INR2,900 (premised on 36x Sep’24 EPS).