Buy CMS Info Systems; target of Rs 460: JM Financial

JM Financial is bullish on CMS Info Systems has recommended buy rating on the stock with a target price of Rs 460 in its research report dated October 26 2023.

Broker Research

October 30, 2023 / 22:49 IST

Buy

26 Aug, 2025 12:21

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JM Financial report on CMS Info Systems

CMS Info Systems’ (CMS) 2QFY24 EBITDA was 8% below JMFe, largely on account of ESOP charges (INR106mn vs. INR21mn in 2QFY23). Adjusted for ESOP charge, EBITDA was up 15% YoY. Revenue grew 15% YoY/6% QoQ driven by managed services (+17% YoY/+11% QoQ, 3% above JMFe) while cash management (CM) business continued to deliver healthy growth (+11%YoY/flat QoQ). Gross profit grew 20% YoY (+3% QoQ), but that was largely offset by employee cost (+28% YoY, high ESOP charges) and other expense (+29% YoY/ flat QoQ). EBITDA margin contracted 170bps YoY/210bps QoQ to 26.8%, mainly on account of ESOP expense (195bps; adj EBITDA margin at 28.7%). On the operational front, CMS a) won INR 5bn worth new orders during 2QFY24 in the managed services segment (INR 6.5bn in 1HFY24), b) posted 6% YoY growth in handling of currency in 2QFY24 to INR 3.3trln, and c) business touchpoints in CM segment stood at 129k, +12% YoY/+3% QoQ. CMS reiterated its FY25 revenue guidance (INR25-27bn). The company remains on a strong footing given its robust business model (significant market leadership in the CM segment, strong track record of diversification and strong earnings growth and return profile (FY25E ROIC >35%).

Outlook

We cut FY24 EPS by 4% while retaining FY25/26 estimates as we bake in ESOP expenses in our forecast. We maintain BUY with Dec’24TP of INR 460, basis 17xDec’25EPS. Sharp reduction in cash in circulation and delay in compliance implementation remain key risks to our call.

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