CMS Info Systems shares fall 17% in a month. Jefferies has 'Buy' tag
Premium- Shares of CMS Info Systems had made stock market debut last year on December 31, 2021
Newly listed stock CMS Info Systems has fallen about 17% in a month's period. Shares of CMS Info Systems, that made stock market debut on December 31, 2021, are however trading more than 8% higher from its initial public offering (IPO) issue price of ₹216 apiece.
Given CMS's healthy earnings growth (24% CAGR over FY22-25), low leverge (debt/ equity < 0.4x), long-term nature of contracts and positive cashflows over next three years, Jefferies has initiated coverage on CMS Info shares with Buy rating and target price of ₹300.
“Profitability can expand further through route-optimisation and upgrade of ATM-services that can offset inflation in oil price. We see profit rising by 34% YoY in FY22 and then at 24% Cagr over FY22-25. Cashflows can also improve as capex in brown label ATMs will peak-out in FY22," the note stated.
However, earnings are most sensitive to revenues from ATM business. Therefore, key risks can arise from rapid digitsation of retail transactions and any adverse change in bank partnership terms, as Top 3 clients drive ~45% of revenues and Top-5 clients drive around 60% of revenues, as per Jefferies.
A combination of pick-up in ATM rollout (new & replacement) & outsourcing, expansion of commercial cash-collection network, normalisation of business post-Covid & increased compliance-services can help industry revenue-pool grow at 15% compound annual growth rate (Cagr) over FY21-27, it highlighted.
While cash faces marketshare loss to digital platforms like UPI, cards, online-banking etc., cash-based infra is still relevant for semi-urban & rural markets, shift from un-organised to organised business and its competitive cost per transaction, of 13-30 bps on transaction value, can sustain its utility to the system," the note added.
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The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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