Buy CDSL; target of Rs 335: HDFC Securities

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HDFC Securities' research report on CDSL

Revenue was up 10.4% QoQ to Rs 505mn (vs est. of Rs 485mn). Growth was supported by 1.5/3.7% QoQ rise in Issuer charges/Transaction revenue. Around 1,400 un-listed companies applied for demat services by paying ~Rs 21K/company. CDSL is adding ~200-250 issuers per month. This additional revenue can boost Issuer charges by ~6-7% for FY20E. Online Data charges (KYC) revenue recovered 5.6% QoQ as Aadhar based offline e-KYC was allowed. The offline e-KYC is done using QR code on a voluntary basis and maintains privacy. This will boost the demand for e-KYC services and CDSL, which has ~60% market share will be a beneficiary.

Outlook

We maintain BUY on CDSL based on better than expected 4QFY19. Annuity revenue stream is driving growth led by un-listed opportunity. We value CDSL on So TP basis by assigned 30x multiple to core FY-21 earnings and adding net cash to arrive at a TP of Rs 335.

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