Buy CMS Info Systems; target of Rs 436: IIFL Securities

IIFL Securities report on CMS Info Systems

CMS’ 15% YoY revenue growth was below estimates, due to rural weakness and a delayed start to the festive season. PAT growth at 16% also trailed estimates, on account of higher ESOP charges. After removing ESOP costs, PAT grew 25%. On the earnings call, management reiterated the FY25 revenue target of Rs25-27bn. While retail cash management (RCM) would be the key driver for the Cash Management segment, order book for Managed Services (MS) segment remains healthy. The company did not rule out a potential increase in competitive intensity across segments, though it expects superior execution to hold it in good stead. We cut EPS estimates by 4-5%; our Dec’24 DCF-based TP comes down to Rs436 from Rs449. The stock trades at 14x 1YF PER — attractive, considering 16% FY23-26ii EPS Cagr. Maintain BUY.

Outlook

We cut EPS estimates by 4-5%, mainly due to higher ESOP costs. After rolling forward to Dec’24, our new TP is Rs436. Valuations remain attractive, considering healthy earnings outlook, strong return ratios and an asset-light business model with ~Rs4.7bn net cash.