Subscribe to CDSL: Motilal Oswal
Motilal Oswal has come out with its report on CDSL. The research firm has recommended to "Subscribe " the IPO in its research report as on June 15, 2017.
CDSL is the leading securities depository by incremental growth of BO accounts and by the total number of registered DPs. It is second largest depository in India in terms of market share. As on April 2017, the company has 589 DPs (from 574 in FY15), servicing across 29 states and 7 union territories. The number of service centres grew at CAGR of 21.4% from 11,877 in FY15 to 17,489 in FY17 and BO accounts grew at a CAGR of 13% from 9.6mn in FY15 to 12.3mn in FY17. The company is aiming to expand its network of DPs and service centres. It expect significant portion of new
ValuationCDSL is the second largest depository in terms of market share and
has been growing at decent CAGR of 23%/14% in 3/5 years (and revenues
grew by 13%/18%). Further, the key positive about the company is that it
has controlled operating expenses in last 3 years which has led to
significant margin expansion of 1150 bps since FY15 to 54% in FY17. At
the upper band of INR149, the offer is available at 18.2x FY17 EPS which
we believe is attractive considering - 1) strong parentage and entry
barrier 2) stable earnings growth 3) strong margins and 4) decent ROE of
16%. Hence we recommend to SUBSCRIBE for long term investment.
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