Buy CAMS; target of Rs 4300: Motilal Oswal

Motilal Oswal's research report on CAMS

CAMS reported operating revenue of INR3.6b in 4QFY25 (7% beat), up 15% YoY. For FY25, operating revenue grew 25% YoY to ~INR14.2b. Total operating expenses grew 18% YoY to INR1.97b. Employee expenses/other expenses rose 12%/27% YoY to ~INR1.2b/INR790m. EBITDA increased 11% YoY to INR1.6b, reflecting EBITDA margin of 44.7% (vs. 46.2% in 4QFY24 and our est. of 40.7%). For FY25, EBITDA grew 29% YoY to INR6.5b. PAT grew 10% YoY to INR1.1b (15% beat) in 4QFY25, driven by strong topline growth. For FY25, PAT rose 32% YoY to INR4.6b. The non-MF business recorded a revenue run rate of ~INR2b in FY25, with management projecting 25% growth in FY26, driven mainly by CAMSPay, AIF, and KRA, which would add around INR500m. EBITDA margins for Non MF were around 10-15% in FY25 and are expected to rise to ~20% in FY26.

Outlook

We have cut our earnings estimates by 5% each for FY26/FY27 to factor in: 1) lower assumption in AUM growth, given market sentiment, and 2) the decline in yields as guided by the management. We expect revenue/PAT to post a CAGR of 12%/13% over FY25-27E. We reiterate a BUY rating on the stock with a one-year TP of INR4,300, premised at a P/E multiple of 35x on FY27E earnings.