Should CMS Info Systems hold or sell and CMS Info systems buy or sell

 CMS Info Systems Limited buy, sell or hold?

CMS Info Systems Company is very small in size. Even we had not seen much interest from retail investors, QIB & NII’s for its company IPO. Many investors & traders are still confused that what they should do in CMS Info systems stock after its IPO listing? Before reaching at conclusion we have to understand the business model, financial performance of CMS Info Systems Company. Let us understand in very easy language.

CMS Info Systems Business model:

Company is largest in cash management when we talk about the number of bank ATM in India

Main focus of the company in maintaining, installation with assets & technology solutions on end to end on outsourced basis for financial institutes, banks, e commerce companies etc.

Company has main business in 3 different segments like cash management services, banking automation products sales & software solutions, financial cards issuance for banks

Company has strong network with 3965 cash vans with 238 branches in all over India including union territories.

Financial performance of CMS Info systems: 

If we will calculate the last three financial years of the company on consolidated basis (In rs) then

FY 19, net profit 96.1cr against total turnover of 1159.3cr

FY20, Net profit 135cr against total turnover of 1388.2cr

FY21, Net profit 169cr against total turnover of 1322cr

FY22 (1st five months ended august 2021) net profit 84.5cr against total turnover of 630cr

Earnings per share of last 3 years on a average 9.6 per share & priced at a P/BV of 3.02 based on its NAV of Rs. 71.6. Company had asked valuation of P/E 15.8 on FY22 basis & nearly 19 P/e on the basis of FY21 earnings

CMS info systems dividend track record:

One of the best things about CMS info systems is that it is dividend Paying Company. FY 19 18%, FY20 24.5%, FY21 15%. Investors may expect dividend in the coming financial years too but it all will depend upon the financial performance of the coming in the coming years.

As per company management, there is one company is listed into the Indian stock market SIS ltd which is the competitor of CMS Info systems.  

Question

What are the positive points of CMS Info Systems?

Answer:

1) Company came up with its company IPO average valuations. At the IPO price band of 205rs to 216rs, we can say that some sort of profit left by company management on table but still we can say that not much juice left.

2) Excellent financial track record as well as promoter’s track record of CMS Info systems. Company had reported 13% profit margins & 23% operating margins with Zero net debt.

3) ATM management services is not an easy task because 3^rd parties also involve in this business for offering services like security to ATM machines & providing IT solutions therefore there is entry barriers for new comers . We can say that CMS Info systems are market leader in its business segment. If small size company has market leaderships in its segment then we may consider it as a positive point because such companies may show good growth in the near future & size of such companies may also become  large if perform well.  

4) There if no debt on company balance sheet. It is a one of the best thing for company shareholders. Free cash flows, expansion with its own funds, no interest cost on company, all these things attract retail as well as big investors for making investment into the company.

Questions:

What are the negative points of CMS Info Systems?

Answer:

1) Two times company promoters had changed in the past

2) Size of the company is small therefore not much interest from big mutual fund companies.

3) Indian government has more focus on digital payments. It may affect on the business of the CMS Info systems because company business has more focus on cash management services.

4) Indian government has more focus on merger of banks, it may have some bad impacts on the business of ATM services.

Question:

Should you hold or sell CMS info systems?

Answer:

CMS info systems stock is for long term investors having risk taking ability. We cannot say at this moment that CMS info systems stock can give multiple returns in the coming years but yes for the reasonable returns long term investors can hold CMS info systems stock. There is nothing bad with CMS info Systems Company.

Question:

Should you buy CMS Info systems stock after IPO listing?

Answer:

If investors want to invest for 1 to 2 years point of view in CMS Info systems stock then yes you can accumulate the stock in small number of sets for average returns of 10 to 15% in the coming months. But we may also see some news driven rallies in such kind of companies stocks.

Long term Targets of CMS Info systems stock:

After analysis above factors, we can say that CMS Info systems stock may reach to 250rs+ price levels in the coming to 2 years  but it’s better to start accumulate the stock at lower levels if comes in the coming days. If investors have shares allotment in CMS Info systems IPO then it is better to keep strict stoploss of 190rs on closing basis & new Investors should take entry in CMS Info only if stock gives closing above 230rs on closing basis in this case stoploss will be 212rs on closing basis. Otherwise you may avoid aggressive buying in CMS Info systems stock.