Cash management company CMS Info Systems has significantly outperformed the market benchmark in the last one year with 32.4% returns compared to BSE Sensex with 10.9% returns

CMS Info Systems has given 32.4% returns in the last year: Should you buy?

The cash management company reported a decent performance in the September 2024 quarter, with 15% year-on-year revenue growth. The performance was supported by significant growth in the managed services segment (36% year-on-year) and moderate growth (8% year-on-year) in the cash management services segment. However, margins (both EBITDA and PAT) contracted quarter-on-quarter and year-on-year amid lower realisations in the cash management segment, execution delays, and lower transactions in Brown Label ATMs (BLA). Analysts believe that such margin compression is temporary and expect performance acceleration in the second half of the current financial year.

The company provides cash logistics services, including ATM and retail cash management and cash in transit. It is expanding into managed services like banking automation, ATM software, and remote monitoring. As a key partner for banks, NBFCs, retailers, and e-commerce firms, CMS Info leverages its network, technology, and solution-focused approach to tackle complex challenges.

Expansion of branch infrastructure (including ATMs) by banks to improve growth and outsourcing of cash management by the retail sector are the key growth drivers for the company. Its business model supports long-term growth as different segments are poised for decent growth. Extensive pan India network, high route density and scale, robust technology and risk management (mitigate manual risks through automation and customised in-house solutions) is helping strengthen the competitive position in the cash management segment. Also, lower competition due to higher compliance costs amid RBI operating regulations creates strong entry barriers, which bode well for the company.

The managed services segment has seen weak margins in the past few quarters due to delays in contracts awarded by PSU banks due to integration issues. However, the management expects a revival in the segment in the second half of 2024-25. An Elara Capital report of October 2024 says that the robust order pipeline and banking sector capex (10,000 new ATMs and 40,000 replacements) are expected to fuel 21% growth in the managed services segment over the next three years.

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In addition, AI remote monitoring solutions provide significant growth opportunities. Currently, it contributes 6-7% to the revenue and the management aims to increase its share to 10% over the next 2-3 years. A JM Financial report released in November 2024 says that remote monitoring is expected to alleviate de-growth risks by driving the company’s diversification story away from ATMs into quick commerce, hospitality, BPO, and other non-BFSI segments. The stock has significantly outperformed the market benchmark in the last one year with 32.4% returns compared to BSE Sensex with 10.9% returns.

Selection methodology: We pick the stock that has shown the maximum increase in ‘consensus analyst rating’ during the past three months. The consensus rating is arrived at by averaging all analyst recommendations after attributing weights to each of them (1 for strong buy, 2 for buy, 3 for hold, 4 for sell, 5 for strong sell). An improvement in consensus analyst rating indicates that the analysts are getting bullish on the stock. Only stocks with more than five analysts covering them are considered. You can see similar consensus analyst rating changes during the past week in ETW 50 table.

This story originally appeared on: India Times - Author:Faqs of Insurances