Shares of Computer Age Management Services (CAMS) inched higher on September 12 after brokerage firm Motilal Oswal Financial Services initiated coverage on the stock with a ‘buy’ rating and a price target of Rs 3,000, implying an upside of up to 22 percent over the next 12 months.
At 12:02pm the stock was trading 2.72 percent higher at Rs 2531.55 apiece on the BSE, while the benchmark Sensex was at 60,222.74, up 429.6 points or 0.72 percent.
Recently listed CAMS is the largest player in India’s registrar and transfer agent (RTA) industry with a 7o percent market share with a deeply entrenched client base that includes four out of the top five mutual funds and 10 out of the top 15 mutual funds in the country.
“With MF penetration in India at just 16% as against the global average of 63%, we expect a strong 15% CAGR in AUM for the industry in the coming decade,” the brokerage firm said in its initiation note on September 12.
Motilal Oswal Financial believes that CAMS’ RTA services in the alternative investment space where it has more than 50 percent market share also has high growth potential given increase in number of launches of such funds and increasing adoption of RTA by portfolio management services.
The account aggregator business could also turn out to be a strong growth driver given CAMS’ ability to handle large databases. “The Account Aggregator business has the potential to revolutionize lending and financial planning, the way UPI did for payments,” the brokerage firm said.
Overall, Motilal Oswal Financial expects CAMS’ net profit and operating cash flow to grow 15 percent and 13 percent, annually, over the next three years. Further, the brokerage firm expects the company’s return on equity to cross 45 percent by 2024-25 with a healthy dividend payout of 60 percent.
“We value it a premium to AMCs, given the duopoly nature of the RTA industry and large growth opportunities in new segments,” Motilal Oswal Financial said.
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