Valuation and View
From a long-term perspective, the structural tailwinds in the MF industry will continue to drive AUM growth, translating into a strong absolute growth in MF revenue for CAMS (15% during FY24-26). CAMS has been investing in the nonMF 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 PAT CAGR of 23% during FY24-26.
Empirically, CAMS has traded at a premium to the listed AMCs in terms of oneyear forward P/E. After the outperformance of AMCs, however, the valuation premium between CAMS and AMC stocks has narrowed. The premium for CAMS is well warranted, given: 1) the duopoly nature of the industry and high entry barriers, 2) relatively low risk of a market share loss, and 3) higher customer ownership vs. AMCs. We reiterate our BUY rating on the stock with a TP of INR3,450, at a P/E multiple of 32x on FY26E earnings.
Click here to download the research report on CAMS by Motilal Oswal
