Target: ₹600
CMP: ₹444
CMS Infosytstems Q3 profit rose 7 per cent year-on-year, falling short of estimates due to weak product sales.
Despite this, there are several positive developments for the company. ATM cash management outsourcing is gaining momentum, the largest competitor defaulted on debt, and CMS is likely to enter the Quick Commerce segment with RM-services. Additionally, there is a possibility of an increase in ATM interchange fees.
CMS may also expand into bullion logistics and debt collection. The outsourcing of ATM cash management is expected to increase, especially with SBI inviting bids for around 10,000 ATMs and other PSUs likely to follow suit. The Quick Commerce segment presents a significant opportunity for CMS, and the company’s expansion into new verticals like remote monitoring systems and brown-label ATMs (BLA) positions it well for growth.
With a 23 percent correction in the past four months, CMS’s valuation looks attractive at 16x FY26 PE. With an improved outlook, the stock is poised for a potential re-rating and could deliver solid earnings growth of 17-20 percent. We maintain our Buy rating on CMS and set a price target of ₹600 based on 18x Dec-26E PE.
Published on February 10, 2025.
