CMS Info Systems Ltd. – BUY

CMP – Rs. 377/- share

Target – Rs. 466/- share

Upside – 24%

CMS Info Systems Ltd. (CMS) was incorporated in 2007 as a services company primarily offering IT maintenance services. It became a cash management leader for the country’s BFSI and retail segments. Today, CMS Info Systems is a leading business services company providing logistics and technology solutions to India’s banks, financial institutions, organised retail, and e-commerce companies. The company’s network stands at 25,000+ employees and associates; the company serves 72,000+ ATMs, 52,000+ business commerce points, and 12,000+ bank branches across 97% of Indian districts. The company primarily operates through two business segments: cash management and managed services. The cash management segment includes ATM cash management, retail cash management, and cash in transit. In contrast, the managed services include banking automation, brown label ATMs (BLAs), managed services, software solutions, and remote monitoring technology solutions.

Why is CMS Info Systems Ltd. worth investing in?
Market leadership in the cash management business is a key differentiator, with business moats challenging to replicate.

Multiple revenue streams, limited competition, and a large TAM provide headroom for managed services growth.

Medium-term industry tailwinds to ensure a visible runway for business, further aided by economies of scale

Increasing operating leverage, healthy order book, and best-in-class balance sheet provide confidence about superior financial performance.

Consistent improvement in margin profile through prudent cost optimisation and scaling up high-margin businesses

Outlook and Valuation
Over the years, the company has moved from one strength to the other:

In the initial phase, it established itself as a strong player in the cash logistics business.
After that, it moved to managed services to have a larger TAM.
Recently, they launched a high-growth potential AIoT business.

In line with the global trends where the cash management business is concentrated and served by large and high-quality players, the company has strong tailwinds linked to compliance implementation to take the business growth forward. As the ATM market continues to shift from bank-managed ATMs to end-to-end deployments of ATMs by service providers, outsourcing ATM management will continue to grow fast in India.

Going forward, we believe that the company will further cement its dominant position in the cash management business in India owing to higher operating leverage and network density. The use of technology to automate logistics operations, a higher share of value-added solutions, and the launch of new business lines. On the valuation front, we value the company based on 18x of FY25E earnings and arrive at a target price of Rs. 466 (24% upside from CMP) with a 12 months investment horizon.

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