Rs 12/Share Dividend: Rs 2,800 Tech Stock Turned Ex-Dividend; ADD For 12% Returns In Near Term

Computer Age Management Services (CAMS), the country's largest Mutual Fund Transfer Agency that provides MF Services & Statements, is in focus on Friday as the stock price turned ex-divid for its upcoming Rs 12 per share dividend payout. On the ex-dividend day, CAMS stock saw a volatile performance. However, this brings in an opportunity for buying on dips in CAMS as Yes Securities recommends to ADD the stock, hinting over a 12% upside in the near term.

At the time of writing, CAMS's share price traded at Rs 2,892.85 apiece, down by 0.6% on BSE. The stock ranged from Rs 2921.20 apiece to Rs 2890.05 apiece respectively.

CAMS declared an interim dividend of Rs 12 per share, and to determine eligible shareholders for the said dividend, the company fixed February 16 as the record date. The expected date of disbursement of the dividend will be on or before 29th February 2024.

In Q3FY23, CAMS reported a consolidated net profit of Rs 88.53 crore, compared to Rs 83.78 crore in Q2FY24, and Rs 73.56 crore. Also, consolidated revenue stood at Rs 269.67 crore in Q3FY24, as against Rs 275.08 crore in Q2FY24, and Rs 243.57 crore in Q3FY23.

In its brokerage note, Yes Securities said that 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.370mn. Adjusted for Think30, which was not in the base last year, non-mutual fund revenue was still up more than 40% YoY. The share of non-mutual fund revenue in total revenue was at 12.8%, up 330bps YoY. AIF segment revenue was up 21% YoY, on a large base, including Fintuple revenue. CAMSPay registered a 28% YoY revenue growth.

Further, the brokerage added, that there is scope for EBITDA margin expansion in CAMS 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 MF 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.

Also, there could be a creep-up in overall EBITDA margin by 20-30 bps per quarter over the next few quarters. Just as in the past, a 100 bps annual expansion in EBITDA margin in FY25 is possible, it said.

Hence, on valuation, Yes Securities note said, "We maintain ADD rating on CAMS with a revised price target of Rs 3250: We value CAMS at 34x FY25 P/E at which CAMS would trade at 14.7x FY25 P/B."

CAMS has been a technology driven financial infrastructure and services provider to Mutual Funds and other financial institutions for over 25 years. As the market leading Registrar and Transfer Agency to the Indian Mutual Fund industry, CAMS serves ~69% of the average assets under management - as of June 2023.

The company also provide technology-enabled service solutions to Alternatives and Insurance Companies. Besides serving as a B2B service partner, CAMS also serves customers through a variety of touch points such as a pan-India network of service centres, white label call centre, online, mobile apps and chatbot.

CAMS' competitive technology advantage stems from the capability, functionality, integration and scalability of our proprietary platforms, which deliver breadth and quality of service and cost efficiencies. Also, its Transfer Agency platform is the largest platform serving the Mutual Fund segment in India and has enabled rapid scaling of the industry while managing the complexities of business operations.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.