Target: ₹720
CMP: ₹604.55
CMS Info Systems has become a vital partner for India’s banks, NBFCs, retail, and e-commerce sectors, providing critical services and solutions across seven business lines. It achieved an impressive revenue/PAT growth of 20/27 per cent between FY21-24, supported by EBITDA & PAT margins of 26.5 per cent and 15.3 per cent, respectively, and an RoIC of 24.2 per cent in FY24.
It enjoys a strong moat with high entry barriers and aims to position itself as a B2B platform business.
We initiate coverage on CMS Info with a Buy and a TP of ₹720, on 22x FY27E EPS of ₹33. CMS Info’s expansion into segments outside the ATM ecosystem carries an option value with scope for a potential rerating. We expect 14 per cent revenue and 13 per cent adjusted PAT CAGRs through FY24-27.
The 25 per cent payout ratio may lead to a 1.5 per cent dividend yield in FY27. With a debt-free balance sheet and strong return ratios – FY27E ROIC of 27 per cent and ROE of 21 per cent (lower due to rise in cash) – valuations are attractive.
CMS Info is incubating two new businesses, which are not factored into the estimates. Key risks are ineffective capital allocation and slower growth in retail cash management