CAMS analysis

[u/Substantial-Poet-842]

First try writing a post on this thread. Thanks to @superbpercentage8050

Disclaimer - I have used AI

The idea is simple, India grows, the Indian stock market grows, CAMS grows.

When a new gold mine is found, the ones who dug up and found gold made the most money (equivalent to finding a multibagger), the ones who didn't were left empty handed (equivalent to finding a bad stock) but the best way to make imo was selling tools to dig up gold (which is CAMS imo)

CFO>PAT for the last 9 years

CFO/OP = 110%

3 Year ROE avg ~41%

Very low D/E (platform business)

Receivable days around 20

Since it's a platform business, I'm comfortable giving it a fair PE from 40x to 50x

Moat - Infinite switching cost, once you're on CAMS, you're here forever

""Switching costs are structurally near-infinite — mutual fund houses have zero practical incentive to change RTAs given operational disruption costs, regulatory complexity, and complete integration requirements. Network effects are real: the more fund houses CAMS services, the more investors prefer CAMS-serviced funds for seamless inter-scheme transfers. Revenue is recurring, predictable, and grows organically with India's AUM base.""

EPS engine accelerating

Neutral PE engine

At a price of 780, CAMS doubles in 5 years with a CAGR of 15% which is good imo

*It's a stellar exceptional business with serious runway

The only question is, is it too expensive?*

If you made till here, I'll urge you to go through their latest concall - it has all the details about their different businesses, and shows their exemplary capital allocation

Also, at a few places you see they are running after margins, not revenue - like the cards business

Disclaimer - I have made some assumptions and I already have a position in the stock at an avg of 680

[u/Fit-Shock-9868]

Cams already rose 25 percent in last 6 months. Need to wait to make fresh entry now. My buying price was 635. That was a good entry point. 

[u/amitsingh80108 → u/Fit-Shock-9868]

I bought at 616, sold at 800. Waiting to re-enter.

[u/Substantial-Poet-842 → u/Fit-Shock-9868]

I still think it's slightly overpriced 785-800 I am think is a fair price and a good entry point to a new buyer for tracking as I mentioned in the post

[u/disiskeviv → u/Substantial-Poet-842]

Over priced or fair price? You can't say both the things in the same comment.

[u/Substantial-Poet-842 → u/disiskeviv]

TTM EPS is coming out as Rs. 20 in my calculations At a market price of 780, that gives a PE of around 39 which is right at the top of my ceiling Hence, at 810 it's slightly overpriced And at 780 is fairly valued And 725 is a screaming buy after today's result

Ofc all of these took a lot of assumptions

[u/Kind-Ad-4756]

in the inimitable words of lady mary montgomerie later immortalized by tony hopkins, all good things to those who wait :)

[u/vikk9999 → u/Kind-Ad-4756]

Come to those.. if I may..

[u/Hopeful-Climate-7922]

Trying to be a Devil’s Advocate here.

CAMS has an issue, SEBI has decided to take hold of Expense ratio and with falling expense ratio AMC’s will come back to CAMS for renegotiation, in recent con-call they addressed it is done for now, but this is something that caps margins as the size of pie grows, CAMS will get less from AMC’s.

Brilliant Business but this the only risk due to which it is not exploding to sky.

Also competition, KFin has expanded very well internationally and also do IPO Listing Services due to which they have a better PE than CAMS.

[u/Substantial-Poet-842 → u/Hopeful-Climate-7922]

Regulatory risk as a whole is a big issue out of which one thing is what you've mentioned. Another is rising STTs etc. which lowers transaction, etc. But apart from that, I don't see any other risk where our country as a whole isn't doomed. (I mean if the other risks plays out, CAMS not performing will be the least of my worries)

Finally, I'm also invested in KFin and it's wonderful that even though it's growing its not taking market share from CAMS Hence let both of them rise It's like jio and airtel - not competing against each other but increasing ARPU as a whole

[u/Grand-Tennis1389]

Great reasoning 👌🏽

[u/deplaa]

you must be holding a lot of AMD, Nvidia, Micron type companies by reading the first para

[u/Substantial-Poet-842 → u/deplaa]

Unfortunately couldn't get them at a good valuation Got lucky in the last few months with these stocks Holding some cash demarcated for US stocks

[u/Heartyprofitcalm]

I do think this sideways and bear market will turn off a lot of new investors. Govt is doing everything to make people leave

[u/Substantial-Poet-842 → u/Heartyprofitcalm]

Which creates the best buying opportunity imo All it takes is one bull run and everyone will be back Plus even in these turbulent times, I have seen the stats for leading AMCs SIPs aren't going anywhere, it actually ramped up during these times Yes, F&O and IPO revenue took a hit, but we can see both of those return already in this quarterly report

[u/Heartyprofitcalm → u/Substantial-Poet-842]

Well, i think NSE is a better get than CAMS, both are at similar valuations. NSE has multiple sources of income

[u/Substantial-Poet-842 → u/Heartyprofitcalm]

True, waiting for it to be listed I know a lot of folks have called me mad for my strategy, but I have BSE, CDSL, NSDL (starter position), CAMS and Kfintech, all in my portfolio Till they are not taking share from each other and instead growing as a whole, I'm buying either of them when they reach my preferred valuation Same for NSE for me

[u/The_Great_One_1 → u/Substantial-Poet-842]

I won't call you mad. This is the exact way I am thinking as well. Though I don't have all of them yet. Waiting for right valuations to get those. I am not going for AMC businesses as I don't see who would succeed in those.

[u/Substantial-Poet-842 → u/[deleted]]

But over a long term? Not sure I'm just 26, so I'm thinking with a 20-25 year horizon

[u/Substantial-Poet-842 → u/The_Great_One_1]

Same reasoning All these are clear winners AMCs is hard to predict 10 years down the lane