Hold Central Depository Services; target of Rs 2,235: ICICI Securities

ICICI Securities recommended hold rating on Central Depository Services with a target price of Rs 2,235 in its research report dated August 07, 2024.

Broker Research

August 08, 2024 / 12:31 IST

hold

26 Aug, 2025 12:21

Volume

Todays L/H

ICICI Securitie's research report on Central Depository Services

Depositories remain a structural play on India’s capital markets buoyed by higher retail participation. Central Depository Services (CDSL) benefits from: 1) Leadership (in a duopoly), in terms of number of demat accounts (market share at 77%, as of Jun’24 [calculated as per data on website]); 2) steady non-market-linked revenue (from annuity issuer charges); 3) possible operating leverage ahead despite investments made in FY24; and 4) optionality such as insurance repository and pledge income (pledge income increased from INR 30mn in Q1FY24 to INR 62.5mn in Q1FY25). Quarterly EBITDA of CDSL increased from average of INR 808mn per quarter in FY23 to INR 1,223mn per quarter in FY24 to INR 1,544mn in Q1FY25.

Outlook

Maintain HOLD; TP revised to INR 2,235 (from INR 2,142) on 40x (unchanged), FY26E core EPS of INR 51.6 (earlier 49.4). We factor in FY24–26E revenue/EBITDA/PAT CAGR of 23%/25%/23%. Accordingly, CDSL’s core EPS is estimated at INR 44.2/INR 41.6 for FY25/26E, respectively. We also add free cash investments of INR 170 per share to the valuation. Our 40x multiple reflects strong growth in capital markets (effect of higher demat account is permanent), lower regulatory risk among capital market plays, possibility of operating leverage ahead and growth optionality in insurance depository business.

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