Target: ₹600
CMP: ₹444
CMS Infosytstems Q3 profit rise of 7 per cent y-o-y missed estimates due to weak product sale.
But, we are enthused by progress in multiple areas: ATM cash management outsourcing is picking-up, largest competitor defaulted on debt, CMS likely to break into Quick Commerce segment with RM-services, ATM interchange may be hiked.
It may also diversify into bullion-logistic and debt collection. Outsourcing in ATM cash management segment is likely to pick-up with SBI putting up bidding for about 10k ATMs and other PSUs may also line-up. Given the investment lining-up in quick commerce segment, we see this as a strong opportunity in the medium term – we await clarity on sizing of this opportunity from management.
CMS can gain market share as it leverages its wider reach, operational edge, stronger balance sheet, partnerships with leading banks and expansion into new verticals like remote monitoring systems and brown- label ATMs (BLA). Like global markets in cash management, India can also consolidate further, and CMS should be a beneficiary of this phenomenon.
Post correction of 23 cent in past 4 months, valuations look attractive at 16x FY26 PE and with improved outlook, we feel stock can re-rate and deliver healthy 17-20 per cent earnings growth. We continue to see CMS among our top-mid-cap picks with Buy rating and PT of ₹600 based on 18x Dec-26E PE.