Radiant Cash Management: Consistent free cash generator, guiding 22-24% CAGR at 16 PE
Overall business characterized by steady growth in revenues, higher growth in EBITDA and PAT, healthy ROCE and ROE and consistently positive cash flow
1. A leading cash management firm
radiantcashservices.com | NSE : RADIANTCMS
Radiant Cash Management Services Ltd (RADIANTCMS) offers a range of cash management services.
Cash pickup: 40%+ market share in retail cash management. On behalf of banks, pick up cash from various outlets & deposits cash in the bank. Get paid by banks, fixed charge per outlet per month
Network cash management: Deposit cash from outlets in RADIANTCMS bank account & then transfer this to client bank. Required where client bank does not have a branch. Charge the bank based on volume of cash deposited in RADIANTCMS account
Cash vans on hire to banks for movement of cash
Other value-added services such as cash processing, vaulting, van behind counter, etcetera, account for the rest.
2. Attractive business characteristics: Cash generator
Overall business characterized by
Steady growth in revenues
Significantly higher growth in EBITDA and PAT because of high operating leverage
Healthy ROCE and ROE
Consistently positive cash flow from operations and
A healthy dividend payment track record
3. FY23: 25% top-line and 64% bottom-line growth
FY23 delivered as per guidance of 22-24% growth
4. Q1-24: Behind on the growth guidance
Q1 has been traditionally a weak quarter is reflected in this performance.
5. Outlook: 22-24% growth till FY25
Till FY '25, I do not foresee any challenge to the growth that we are currently predicting of 22% to 24% year-on-year and that will be our endeavour, and I think we are on track as of now
6. 22-24% growth till FY25 at a PE of 16
7. So Wait and Watch
If I hold the stock then one can hold on as RADIANTCMS as its a consistent cash generator with 20%+ growth outlook till FY25. However, it has not delivered as per the management guidance for Q1 and has been explained by seasonality. One needs to wait and watch for Q2-24 results very closely to see if the company is delivering on the growth as guided by the management. The company is valued reasonably for a PE of 16 which gives it a margin of safety to sustain a relatively weaker quarter along the way.
8. Or, join the ride
If I am looking to enter the stock then
RADIANTCMS has delivered a top-line CAGR of 25%+ for FY21-23 and has a guidance of 22-24% growth till FY25 which makes the PE of 16 look attractive.
Q1-24 results were not very exciting but were explained as seasonality and investing for the future. At PE of 16, there is a cushion to ride thru one relatively weak quarter.
RADIANTCMS generated Rs 68 cr of free cash flow. At a market cap of Rs1,017 cr, it translates to a free cash flow yield of 6.7% which makes for very attractive valuations.
The business characteristics make RADIANTCMS a very attractive business to hold over the long term provided the management keeps delivering on its guidance
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Disclaimer
It is an analysis of the company data and not a stock recommendation
My analysis can be completely wrong and can change the next minute based on changes in my understanding of the company
I look to own good companies at prices where there is a path to market beating returns over decades