Buy CDSL; target of Rs 435: Reliance Securities

Reliance Securities's research report on CDSL

Central Depository Services (CDSL) has reported a strong set of operational numbers in 2QFY18. Its revenue rose by a healthy 22.4% YoY to Rs472mn led by 18.2% YoY growth in Depository segment. On the other hand, Data Processing revenue rose by a strong 35.2% YoY. The strong revenue growth was aided by good health of capital markets with the key indices hitting all-time highs and strong new MF account openings. Key growth drivers in terms of businesses were Transaction charges (+26% YoY), IPO/Corporate Action charges (+68% YoY) and KYC/Online Data Charges (+41% YoY). Owing to operating leverage and cost control, CDSL’s EBITDA margin powered ahead by 221bps YoY to 63.5%, and by 26.8% YoY in absolute terms to Rs300mn. However, owing to lower other income (-17.6% YoY) and a higher effective tax rate, reported PAT rose at a slower pace than EBITDA, by 10.5% YoY to Rs267mn.

Outlook
Trimming down our EPS estimates by 4%, we maintain our BUY recommendation on the stock with a revised Target Price of Rs435 (from Rs450 earlier). For all recommendations report, click here

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