Buy Computer Age Management Services With a Target Price Of Rs. 3,000: Motilal Oswal

Outlook of Computer Age Management Services (CAMS)

Computer Age Management Services is involved in the mutual fund's transfer agency business. It provides clients' distributor, investor, and Asset Management Companies (AMC) services. The company is the largest registrar and transfer agent for Mutual Funds in India.

The company's market capitalization is Rs. 12 652 Crore, with the current market price of Rs. 2,586. The 52-week high of the stock is Rs. 3, 740 and the 52-week low is Rs. 2,037. The stock has shown a strong momentum to the upside and is looking to continue the momentum as per the reports of Motilal Oswal.

Valuation Outlook of Computer Age Management Services

According to the latest report of Motilal Oswal, "CAMS has traded at a premium to listed AMCs in terms of one-year forward P/E. This premium is well deserved, owing to 1) the duopoly nature of the industry and higher entry barriers that restrict the entry of new players, 2) relatively low risk of a market share loss, and 3) higher customer ownership compared to AMCs."

Further, the report mentions, "CAMS is expected to deliver FY22-25 revenue/EBIDTA/PAT CAGR of 14%/13%/15%, with a Return on Equity of 45.2% in FY25. Accordingly, we initiate coverage on the stock with a Buy rating and a one-year target price of INR3,000 (36x Sep' 24E EPS)".

Buy call of Motilal Oswal on Computer Age Management Services

The headline of the latest report of Motilal Oswal says, "Prepared to succeed in conjunct opportunities." Motilal Oswal has a bullish view of the stock in the overall analysis. The report says, "We initiate coverage with a Buy rating and a one-year target price of INR3,000. We value it at a premium to AMCs (14-25x one-year forward P/E), given the duopoly nature of the RTA industry and large growth opportunities in new segments."

Key risks on buy call of Motilal Oswal

As per the latest report of Motilal Oswal, there are four key risks for taking the buy call. The report says,

• "Volatile equity market: An unfavorable movement in the Equity market can adversely impact the AUM mix, resulting in a squeezing of yields. This can negatively hit revenue and profitability.

• Slower AUM growth: Slower than expected growth in AUM can be detrimental as most of its revenue is derived from AUM-linked revenue.

• Loss of customers: The loss of a single customer can negatively impact the business as 67% of its revenue is concentrated in its top five clients.

• Cyber security: CAMS maintains all critical data records for investors on behalf of its clients. A financial liability may arise for CAMS in case of any data security breach."