Stock To Buy: Posted In-line performance; Steady Growth Expected, Buy For Robust 50% Gains

Bonanza Research in its recent report on Computer Age Management Services Limited (CAMS) has given a buy rating to the stock of the company for robust gains up to 50% with a target price of ₹3,400 per share. CAMS is a mutual fund transfer agency serving Indian asset management companies. It is a small-cap stock with a market cap of ₹11,132.08 crore.

CAMS posted in-line revenue (+2.4% QoQ). The brokerage is bullish on CAMS due to market leadership in the duopoly RTA market, four out of the five largest MFs as well as 10 of the 15 largest MFs based on AAUM are their clients, significant entry barriers, lower MF penetration in India (16%) compared to global average (63%) and high switching costs position CAMS favourably.

Stock Outlook & Returns

The current market price (CMP) of CAMS stock stood at ₹2,272.15 apiece on NSE, down 0.26% from the previous close.
 
 The stock in a week has fallen 3.44%, whereas, in 1 month 13.8%, respectively. Over the past 3 months, the stock has given 2.17% positive return. It has given 25.81% negative return over the past 1 year. It was listed on the stock exchange on 7 May 2021, and since its listing, it has given massive 62.13% positive return.

The stock recorded its 52 week high in November 2021 at ₹3,140.40 and the 52 week low recorded in May 2022 at ₹2,037.15, respectively.
 

Brighter outlook ahead

Industry AAUM up to 39.6 Lakh Cr (up 8.3%/3.5% YoY/QoQ) while equity AAUM saw the fastest growth, reached ₹ 18.4 Lakh Cr (up 20.1%/6.8% YoY/QoQ). Rising proportion of high yielding equity segment (45.1% by Q2FY23, which is expected to reach above 50% by FY25E). Recently launched CRA business has achieved 9.5% share and #2 position in new ENPS sales in Q2FY23.

Q2FY23 Performance

Overall CAMS AAUM increased by 3.1% QoQ while there was 7.5% increase in equity AAUM QoQ with stable market share of 69%. Inflows through SIP increased by 4.7% QoQ. Transaction volumes increased by 2% QoQ to ₹ 11.3 Cr. CAMS share in new SIP sustained at 61% in Q2FY23. New SIP registration stood at ₹ 38 Lakh in Q2FY23 vs ₹ 37 Lakh in Q1FY23. Live SIP grew ₹ 14 Lakh in Q2FY23. SIP book was up 5% QoQ to ₹ 3,200 Cr. Unique investor services increased 3% QoQ to ₹ 2.4 Cr. AIF saw growth of 32% YoY with 19 new business addition in Q2FY23 while eInsurance Account & e-Policy doubled in volume in QoQ.

What should investors do?

The brokerage said, "We expect that a lot of downside has already priced in but uncertainty in the markets is still prevailing. We believe CAMS has a huge potential to grow so we maintain a BUY, 45x PE which is its all-time average on FY24E EPS of ₹ 75.6, for a target price of ₹ 3,400, a potential upside of 44%."

Disclaimer

The stock has been picked from the brokerage report of Bonanza Research. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.