Buy CAMS; target of Rs 850: Emkay Global Financial

What happened

Emkay Global Financial maintained its BUY recommendation on CAMS and an unchanged target price of Rs 850. The report said second-quarter revenue rose about 5% sequentially and EBITDA, a measure of operating earnings, rose about 4%; non-mutual-fund revenue increased about 12%.

Confirmed

Global impact / market context

CAMS’s growth in both mutual-fund and other business revenue supports its ability to expand sales beyond its core activity. If management achieves its stated improvement in non-mutual-fund profit per sale through productivity, higher profits could follow, though the brokerage made little change to its profit estimates.

Analyst inference

The report describes mutual-fund assets under management, meaning the value of funds serviced, growing 4.5% sequentially, while related revenue increased about 4%. Non-mutual-fund revenue rose faster, led by CAMS PAY and KRA, but revenue earned from mutual-fund assets dipped slightly.

Confirmed

What to watch

1. Check future results for mutual-fund assets under management and revenue yields, meaning revenue earned from those assets; yields dipped slightly this quarter despite asset growth. Analyst inference
2. Watch whether CAMS avoids major mutual-fund price reductions in the second half of the financial year and steep discounts on large renewals due next year, as management expects. Proposed
3. Track non-mutual-fund profit per sale against management’s target of 25–30% within three years, and company-wide improvement against its stated productivity outlook. Proposed

Evidence

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