Motilal Oswal Financial Services Ltd. (MOFSL) has issued a BUY call for CAMS with a target price of INR 5,100, representing a 15% upside from the current market price of INR 4,423. This rating is based on the company’s robust financial performance, continued dominance in the mutual fund (MF) servicing industry, and increasing focus on non-MF business segments. CAMS has been positioning itself for strong growth by leveraging technological advancements, expanding market share, and improving operational efficiency across its key verticals. Below is a detailed analysis of the report’s key takeaways and investment recommendations.

Strong Financial Performance and Growth Projections

CAMS is projected to achieve robust growth across revenue and profit metrics.
Motilal Oswal anticipates CAMS to deliver a compound annual growth rate (CAGR) of 16.7% in revenue and 22.2% in profit after tax (PAT) during FY24-27E. By FY27, the company’s revenue is expected to reach INR 18,057 million, with PAT rising to INR 6,412 million. These growth figures are driven by CAMS’ strong position in the MF industry, enhanced by its growing presence in non-MF businesses. Earnings per share (EPS) is forecasted to grow from INR 71.6 in FY24 to INR 130.9 by FY27.

Leadership in Mutual Fund Servicing

CAMS maintains its dominant market share in the mutual fund industry.
With a 68% market share in assets under management (AUM) servicing the mutual fund sector, CAMS continues to lead the industry, servicing INR 44.7 trillion out of the total industry AUM of INR 66 trillion. The company’s equity assets have consistently grown at a faster pace than competitors, and it services four of the top five asset management companies (AMCs) in India. The company's technological edge, including automation and the use of AI, contributes significantly to its operational efficiency, enabling a monthly run rate of 70 million transactions in YTDFY25.

Non-Mutual Fund Business Segments on the Rise

CAMS is expanding its non-MF business segments to capture new revenue streams.
Non-MF business segments are expected to contribute 20% of the company’s revenue by FY27, up from 13% in FY24. Key drivers include CAMSPay, CAMSKRA, and CAMSFinserv. CAMSPay, which received final authorization as a Payment Aggregator from the RBI, is expected to deliver 60% revenue growth in FY25. Meanwhile, CAMSKRA, a leader in KYC processes for capital markets, is leveraging AI and new digital solutions to capture market share, with plans to double its revenue by FY28. CAMSFinserv, the company’s account aggregator business, is also gaining traction across the lending, insurance, and capital market segments.

Technological Innovations Driving Efficiency

CAMS continues to invest in technological advancements to boost efficiency and scale.
The company has fully embraced AI and automation across its operations. Its partnership with Google to migrate its data to the cloud is expected to enhance database control, increase capacity, and reduce operational wastage. CAMS has also introduced advanced dashboards to ensure regulatory compliance and improve the monitoring of transactions. Its AI-enabled Optical Character Recognition (OCR) technology in its CAMSRep division further streamlines insurance policy onboarding, enabling rapid digital conversions.

Valuation and Target Price

Motilal Oswal assigns a target price of INR 5,100 for CAMS, implying a 15% upside.
Based on a valuation of 42x FY26E EPS, CAMS’ stock is poised for a strong run. The stock is currently trading at INR 4,423, and analysts expect it to reach INR 5,100 within the next 12 months, reflecting a 15% upside potential. The company’s high return on equity (RoE), forecasted to rise to 47% by FY27, and strong earnings growth support the investment thesis for a BUY rating.

Investment Considerations

CAMS offers a compelling investment opportunity for long-term growth.
With structural tailwinds in the mutual fund industry and increasing contributions from non-MF business segments, CAMS is well-positioned to sustain its leadership and continue delivering strong financial results. The company's focus on technology and operational efficiency will enhance profitability, making it an attractive investment for those seeking exposure to India’s growing financial services industry. Investors should monitor the company’s progress in scaling its non-MF businesses and the broader industry dynamics to maximize returns.

In conclusion, Motilal Oswal’s BUY recommendation for CAMS is underpinned by the company’s dominant position in mutual fund servicing, rapid growth in non-MF businesses, and technological innovations. With a target price of INR 5,100, the stock provides a promising opportunity for investors seeking steady growth over the next year.