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Motilal Oswal Report
From a long-term perspective, the structural tailwinds in the mutual fund industry will continue to drive assets under management growth, translating into a strong absolute growth in MF revenue for Computer Age Management Services Ltd. (15% during FY24-26).
CAMS has been investing in the non-MF businesses over the past couple of years, which will lead to an improvement in the share of revenue to 20% over the next five years.
Operating leverage will drive margin expansion in these businesses, percolating to an overall profit after tax compound annual growth rate of 23% during FY24-26.
Empirically, CAMS has traded at a premium to the listed asset management companies in terms of oneyear forward price/earnings. After the outperformance of AMCs, however, the valuation premium between CAMS and AMC stocks has narrowed. The premium for CAMS is well warranted, given:
the duopoly nature of the industry and high entry barriers,
relatively low risk of a market share loss, and
higher customer ownership versus AMCs.
We reiterate our Buy rating on the stock with a target price of Rs 3,450, at a P/E multiple of 32 times on FY26E earnings.
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