CAMS Q3 Results Review - Non-Mutual Funds Businesses See Improved Traction: Yes Securities

Yes Securities Report

Multiple segments have combined to contribute to strong non-mutual fund revenue growth:

Non-mutual fund revenue was up 59.9% YoY and 4.4% QoQ to Rs 370 million. Adjusted for Think 30, which was not in the base last year, non-mutual fund revenue was still up more than 40% YoY. Share of non-mutual fund revenue in total revenue was at 12.8%, up 330 basis points YoY. Alternative investment fund segment revenue was up 21% YoY, on a large base, including Fintuple revenue. CAMSPay registered a 28% YoY revenue growth.

There is scope for Ebitda margin expansion driven by payback in non-mutual fund business investments:

The blended Ebitda margin of the non-MF businesses is less than 15% whereas the Ebitda margin of the mutual fund business is well above 44%. As the cost in the non-MF businesses plateaus and the revenue rises, the blended margin of the non-MF businesses would rise to 25% over the next few quarters.

There could be a creep up in overall Ebitda margin by 20-30 basis points per quarter over the next few quarters. Just as in the past, a 100 bps annual expansion in Ebitda margin in FY25 is possible.

We maintain Add rating on CAMS with a revised price target of Rs 3250:

We value Computer Age Management Services Ltd.'s at 34 times FY25 earning price at which CAMS would trade at 14.7 times FY25 price/book.

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