Neutral CDSL; target of Rs 1500: Motilal Oswal

Motilal Oswal's research report on CDSL

CDSL’s operating revenue grew 30% YoY to INR2.8b (10% miss) in 3QFY25, driven by 27%/87% YoY growth in Annual Issuer Charges/IPO and Corporate Action Charges. For 9MFY25, revenues rose 50% YoY to INR8.6b. EBITDA grew 22% YoY to INR1.6b (15% miss), resulting in EBITDA margin of 57.8% (vs. 61.3% in 3QFY24 and 62% in 2QFY25). For 9MFY25, EBITDA increased 51% YoY to INR5.1b. Operating expenses rose 41% YoY to INR1.2b, resulting in a CIR of 42.2% vs 38.7% in 3QFY24 and 38% in 2QFY25. PAT for 3QFY25/9MFY25 rose 21%/47% YoY to INR1.3b (20% miss)/INR4.3b. PAT margins came in at 46.7% vs. 50.1% in 3QFY24 and 50.3% in 2QFY25. Tech costs increased 89% YoY to INR296m, and management has guided that such investments in tech will continue. As a market infrastructure company, CDSL is required to maintain high-quality hardware and software systems.

Outlook

We have cut our earnings estimates by 10%/8%/8% for FY25/FY26/FY27 to factor in the impact of true to label on transaction revenues and continued investments in tech and human resources. We expect Revenue/PAT to post a CAGR of 28% each over FY24-27 and reiterate a Neutral rating on the stock with a one-year TP of INR1,500, premised at a P/E multiple of 40x on Sept’26E earnings.