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Business News/ Markets / Stock Markets/  Jefferies bullish on this Indian midcap financial stock on attractive valuation. Details here

Jefferies bullish on this Indian midcap financial stock on attractive valuation. Details here

Jefferies said that CMS Info stays among key midcap buys


CMS Info appears poised to deliver 20% compound annual growth rate (CAGR) in revenue and 25% in profit over FY22-25, as per global brokerage Jefferies. Despite 40% rally since listing, the brokerage said that its valuation is inexpensive at 13x FY24 PE and stays among key midcap buys.

“In key segment, ATM/Cash Mgt, c70% of revenue, outsourcing is gathering pace from PSU bks, with compliance-services aiding growth. CMS has also ramped-up well in Remote Monitoring Sols, where it plans to expand from ATM-RMS to broader services where yields & margins will be better," the note stated.

A combination of pick up in ATM roll-out & outsourcing as well as ramp-up of remote monitoring system can drive growth. Jefferies expects CMS to deliver a 25% CAGR in profits over FY22-25, aided by 20% operating revenue growth and margin expansion. 

“Despite the 40% rally since listing, valuations are inexpensive at 13x FY24 PE and we see scope for re-rating aided by healthy growth and its sustainability," it said while maintaining Buy rating on CMS Info Systems shares with target price of 390 apiece based on 15x Sep-24 EPS and sees strong earnings outlook and “valuation attractive."

“CMS has scaled-up the Remote Monitoring Solutions (RMS) segment well with 18k active sites. A majority of these sites are at ATMs with relatively simpler platforms. However, we believe that CMS plans to expand into larger and more profitable segments of RMS like branches of banks/ NBFCs, retail outlets, hospitality, manufacturing among others," the note added.

“Management targets to achieve 2.5 bn in revenues from this segment by FY25 (15% higher than our base case) and this would form c.10% of revenues then. We also understand that yields and margin profile of the newer segments will be much better," said Jefferies.

Shares of CMS Info Systems, that made their stock market debut last year on December 31, 2021. CMS provides cash management services, which include ATM services, and cash delivery and pick-up. It caters to broad set of outsourcing requirements for banks, financial institutions, organized retail and e-commerce companies in India.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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Published: 21 Dec 2022, 10:27 AM IST
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