Why CMS Info Systems Share is a Promising Investment?
CMS Info Systems Ltd. is a dominant player in the cash management and ATM services industry in India. It specializes in ensuring that ATMs are consistently operational by managing cash supplies and offering a range of cash-related services. Over the years, the company has expanded its offerings to include managed services, technology solutions, and even promising new ventures.
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Why CMS Info Systems Share is a Promising Investment?
1. Sector Leadership and Market Advantage
CMS holds the top position in ATM cash management, cash logistics, and AIoT-based remote monitoring. Its dominance allows the company to capitalize on industry trends like consolidation, triggered by tighter regulations and public sector bank mergers. Smaller players are exiting, leaving more business opportunities for established entities like CMS.
2. Track Record of Robust Growth
- Revenue has grown at a compound annual growth rate (CAGR) of 17% over the last 15 years.
- EBITDA and PAT have grown at 19% and 21% CAGR, respectively, during the same period.
- Its return on capital employed (ROCE), excluding cash, stands at an impressive 37%.
3. Technological Expertise
CMS is leveraging advanced technology for remote ATM monitoring, eliminating the need for on-site guards while enhancing ATM security and functionality. Its proprietary ALGO platform already supports over 50,000 ATMs across India, ensuring optimal uptime and seamless customer experiences.
4. Capable and Committed Leadership
Rajiv Kaul, the ex-Microsoft executive steering CMS, has demonstrated exceptional leadership. His commitment is underscored by an increase in his personal stake to 6.19% in the past year, signaling confidence in the company’s future.
Valuations: Attractive Entry Point
Despite a 35% increase in stock price over the last year, CMS trades at a trailing price-to-earnings (P/E) ratio of 24x, well below its 28% earnings growth over the past three years. This presents a compelling valuation for investors seeking long-term growth.
Key Growth Drivers for CMS Info Systems
1. Cash Management Services
Core Business Contribution: Cash logistics accounts for 60% of CMS’ revenue.
Sector Opportunity: With banks like SBI, HDFC, and Kotak Mahindra planning significant branch and ATM expansions, CMS is positioned to benefit from increased cash flow management needs.
Market Share Growth: CMS has increased its share in the ATM cash management business from 39% to 49% over four years, while over 40% of ATMs in India are still managed by banks, presenting further outsourcing opportunities.
2. Managed Services
Expanding ATM Infrastructure: As rural and semi-urban areas gain financial inclusion, banks require automation solutions for ATMs, cash recyclers, and kiosks.
Focus on Brown-Label ATMs: CMS operates 5,500 brown-label ATMs, a figure expected to rise with outsourcing trends.
3. Technology Solutions
Remote Monitoring Growth: With AI-driven insights, CMS monitors over 21,000 sites, reducing fraud and improving operational efficiency.
Enhanced ATM Features: Modern ATMs serve as digital banking hubs, offering services like credit card payments, cheque book requests, and more, creating new revenue streams for CMS.
Also Read: Amendment of PSU Shares
4.New Ventures and M&A
Gold Logistics: CMS has partnered with major players like Muthoot FinCorp and Kalyan Jewelers, leveraging the increasing demand for gold transportation and security.
Retail Debt Collection: As credit penetration rises, CMS aims to provide tech-enabled collection solutions for banks and NBFCs.
Acquisitions: With cash reserves of ₹780 crore, CMS is actively exploring opportunities to acquire companies that can strengthen its capabilities.
Potential Risks
1. Digital Payment DisruptionL: The rapid adoption of UPI and digital wallets poses a long-term threat to cash transactions. However, the currency in circulation has grown significantly, and cash remains the preferred payment mode in rural and semi-urban areas.
2. Dependence on ATM Growth: Growth in ATM cash logistics is closely tied to the expansion of ATM networks. Any stagnation in ATM deployment could affect CMS’ topline.
3. Regulatory Challenges: Policies promoting digital transactions over cash could impact the demand for CMS’ services.
4. Keyman Risk: Rajiv Kaul’s leadership is critical to CMS’ success. A potential change in leadership could create uncertainties.
Conclusion: Why You Should Consider Investing in CMS Info Systems Share
CMS Info Systems is well-poised to sustain its leadership position in cash management while expanding into lucrative new segments. Its strong growth trajectory, driven by consolidation, technology, and new ventures, coupled with reasonable valuations, makes it an attractive option for growth-focused investors.
Investment Recommendation
Invest in CMS Info Systems with a 5+ year horizon to benefit from its strategic initiatives and long-term growth potential.
*Disclaimer: This analysis is for informational purposes only and does not constitute investment advice. Consult a financial advisor before making investment decisions.*
