JM Financial report on CMS Info Systems
CMS Info Systems’ (CMS) 1QFY24 performance was a modest miss on revenue front, though strong margin performance led to beat on PAT (4% above JMFe). Revenue grew 13% YoY (+2% QoQ, 3% below JMFe), driven by steady growth in the cash management (CM) business (+12%YoY/flat QoQ, 2% below JMFe) and managed services revenue (12% YoY/7% QoQ, 2% below JMFe). EBITDA margin improved 150bps YoY/ 10bps QoQ (50bps above JMFe) on the back of efficiency gains and operating leverage. On the operational front, CMS business touchpoints in CM segment at 126k, +10% YoY, while it posted 6% YoY growth in handling of currency in 1QFY24 (highest-ever quarterly currency throughput of INR 3.3trn) and it won INR 1.5bn worth orders during 1QFY24 in managed services segment. CMS is firm on its long-term guidance of doubling revenue from FY21 to FY25. We broadly maintain our FY24-25 EPS estimates. 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 >40%).
Outlook
We roll forward our TP to June’24 of INR 465, valuing it at 17xJune’25EPS. Sharp reduction in cash in circulation and delay in compliance implementation remain key risks to our call.
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