Rs 2.5/Share Dividend: Jefferies, 2 Other Brokerages Recommend BUY On CMS Info Systems; 40% Upside Ahead

Smallcap, CMS Info Sytems will be in focus next week as its stock price will turn ex-dividend on February 6 for a dividend payout to the tune of 25%. In Q3 of FY24, the company registered robust growth in revenue and PAT. Ahead of quarterly earnings, brokerages Jefferies, Axis Capital and DAM Capital have recommended buying CMS Infos shares. Up to 40% potential upside is seen in CMS Info.

CMS Info Systems Share Price:

On February 2nd, the stock price ended at Rs 385.65 apiece, up by 1.8% with a market cap of Rs 6,042.74 crore.

The stock's 52-week high and low are at Rs 421.05 and Rs 261.10 respectively.

CMS Info Systems Dividend:

As per the regulatory filing, the Board of Directors has declared an interim dividend of Rs. 2.50/- per equity share of face value of Rs. 10/- each fully paid up and the said interim dividend will be paid on or before February 22, 2024. In percentage terms, the dividend payout will be 25%.

Further, the company has fixed Tuesday, February 6, 2024, as the "Record Date" for payment of Interim Dividend. The stock will turn ex-dividend on February 6 as well.

Currently, its dividend yield is 1.23%.

CMS Info Systems Q3 Results:

During Q3FY24, the company reported revenue of Rs 582 crore, up by 19% YoY. Adjusted EBITDA stood at Rs 163 crore, up by 16% YoY. Meanwhile, adjusted PAT were at Rs 96 crore, posting a growth of 22% YoY.

In the quarter, new business wins of Rs 600 crore in the quarter, and YTD's new business wins now at Rs 1,250 crore in the Managed Services & Technology Solution business. Also, the company added 4,000 business points in cash logistics, 10% YoY growth.

CMS Info Systems Share Price Next Target:

Axis Capital:

While revenue from the managed services vertical was up 36% YoY, the segmental EBIT margin at 17.7% was 236 bps lower. Although a part of this decline was attributable to a change in revenue mix tilting towards product sales, management's conscious decision to prioritize market share amid an environment of increasing competitive intensity also contributed to margin decline.

While FY24 and FY25 revenue guidance remain intact, increasing competitive intensity and a higher share of managed services can somewhat pressure the margins. We cut our target price to Rs 455 (Rs 481 earlier) to factor in - (1) 3-6% EPS cuts and (2) roll forward of target P/E to Dec'25E from June'25E. Maintain BUY.

Jefferies:

A pick-up in ATM rollout & outsourcing as well as a ramp-up of remote monitoring systems should drive growth. We trim estimates by 2-3% and expect CMS to deliver a 16% CAGR in profits over FY24-26, aided by 16% revenue growth. Valuations are attractive, and we see scope for re-rating aided by healthy growth as well as cashflows. We maintain a BUY call with a target price of Rs460 (earlier Rs470) based on 15x Mar-26 PE & rate CMS as Buy.

DAM Capital:

CMSINFO remains an inexpensive play on banks' non-core activities outsourcing industry - especially given lucrative business opportunities in existing segments as well as potential new segments (which are currently small or in the incubation stage). Increasing compliance norms (more prevalent for ATMs today but which should eventually touch RCM/CIT too) is an added potential market-share driver for larger players like CMSINFO over the near to medium-term.

CMSINFO is on track to achieve the upper end of its near-term revenue goal of Rs25-27bn - its relatively high margins versus industry (given scale benefits from its network density) plus cash-rich/zero debt balance sheets are other key elements in its favour vis-à-vis competitors. Maintain BUY (DCF target price Rs540 / implied FY26E P/E ~16x / 39% upside).

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, 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.