Central Depository Services (India) Ltd. share price target

Depositories remain a structural play on India’s capital markets, buoyed by higher retail participation and distinguished by a mix of annuity and transaction-based business.

CDSL’s operating revenue rose 9% YoY but declined 5% QoQ to INR3.0b (in line). The sequential decline was due to a 2%/5% drop in annual issuer charges and IPO & corporate action charges to INR1.1b and INR590m, respectively.

Depositories remain a structural play on India’s capital markets, buoyed by higher retail participation and distinguished by a mix of annuity and transaction-based business.

CDSL’s operating revenue declined 1% YoY but grew 23% QoQ to INR3.2b (7% beat) in 2QFY26.

CDSL’s operating revenue declined 7% YoY and 19% QoQ to INR2.2b (7% miss), primarily due to a 36%/29% YoY decline in transaction revenue/online data charges. For FY25, the company’s revenue grew 33% YoY to INR10.8b.

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.

Depositories remain a structural play on India’s capital markets buoyed by higher retail participation. Central Depository Services (CDSL).

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 the number of demat accounts (market share at 73% as of Jun’23); 2) growth optionalities for its digital platforms (insurance repository included); and 3) steady non-market-linked revenues (from annuity issuer charges).

Depositories remain a structural play on India’s capital markets benefitting from higher retail participation. We believe Central Depository Services (CDSL) warrants higher valuation multiples due to its: 1) leadership (in a duopoly) in terms of the number of demat accounts

Depositories remain a structural play on capital markets benefitting from higher retail
participation.

We note the combination of increased retail participation in capital markets and increased digitisation are two structural levers for CDSL. These remain germane despite the likely dip in market-related revenues (61%/69% of total revenues in FY21/FY22) in FY23E. Optionalities, execution and duopolistic industry structure provide strong long-term earnings growth potential.

Our positive stance on Central Depository Services Ltd (CDSL) is based on the premise of its business model, positioning, and market share gains, return ratios, and free-cashflow yield. The co. has been the biggest beneficiary of the revival in capital market activities evident in 170%+ YoY in its transaction charges (35% of its revenues) and continued growth in its annual issuer charges. With tailwinds in form of GoI initiatives and efforts by CDSL at enhancing its revenue opportunities, we see drivers for strong revenue/earnings growth. However, in the backdrop of recent outperformance and need for consistency, we lower our rating to HOLD, albeit revise our TP upwards to Rs750 (valued on a two-stage dividend discount model). We have argued for valuation...

We retain BUY on Central Depository Services Ltd (CDSL) with a target price revised upwards to Rs650. CDSL stands to gain from the strong revival in capital market activities evident in a) increase in Beneficiary accounts (BO), b) surge in deliverybased volumes, c) continued traction in KYC business, and d) steady-rise in annual issuer charges. GoI initiatives (as laid out in the recent Budget), including efforts by CDSL at enhancing its digital footprint, Aadhar-based authentication, online licensing etc. will aid in strong revenue growth / newer revenue opportunities. We are factoring in 20.2%25.1% CAGR in revenue/net profit over FY20-23E. Businesses with a healthy margin profile, asset-light model, and duopoly nature of existence...

We retain BUY on Central Depository Services Ltd (CDSL) with target price revised upwards to Rs560. In our IC note (https://bit.ly/3jAh1O7), we had highlighted CDSL as a play on the revival in capital market activities (as also evident from the test of significance study and stock ). On a systemic-basis, Beneficiary account (BO) addition coupled with delivery-based volumes has been on the rise. This in addition to surge in fund-raising activity by corporates and a steady rise in avenues for annual issuer charges bodes well for CDSL. This was also got reflected in its recent results that saw was a sturdy 69% YoY rise in revenues / 68% YoY rise in PAT. Empirical...

We initiate coverage on Central Depository Services Ltd (CDSL) with BUY and Target price (TP) of Rs525. This thinly covered stock sports a well-diversified revenue mix, impressive margins, and correspondingly healthy returns. The asset-light model, duopoly play on the secular increase in stockholder accounts coupled with potential market share gains is an added positive. While this itself is a successful recipe for growth, the icing on the cake could be the massive unexploited revenue opportunities in CDSL's core activities, and leveraging its customer base and data for new businesses, a feat adroitly accomplished by similar sectors such as credit rating agencies (not to...

Asset light CDSL (Central Depository Services Ltd) is a proxy play on the financial services economy. As part of a duopoly, CDSL has done well to emerge as a leader (market share of ~54% in terms of investor accounts) in the Depository DP segment while it lags (market share of ~33%) its competitor NSDL in the corporate issuers segment.

CDSL has a diversified revenue stream, ~35% of the revenue is annuity in nature and ~42% is market linked (Transaction, IPO/corporate action and KYC). The opportunity related to demat of ~60K unlisted public companies is unfolding and hike in Annual issuer charges is also due in FY21E. Transactions charges/KYC revenue will revive with retail participation and improved market sentiments. New revenue streams like NAD and e-warehouse receipts are future growth drivers. We expect revenue/EBIT/PAT to grow at a CAGR of 13/10/10% over FY19-22E. Net cash stands at Rs 6.50bn (~23% of Mcap) and the company trades at a P/E of 22/19x FY21/22E earnings. Risks include regulatory changes, market slowdown and increase in competition. We maintain BUY on CDSL based on inline revenue and better margin performance in 3QFY20. Growth in Annual issuer charges and revival of transaction revenue is driving growth. Regulatory tailwinds like hike in Issuer charges and compulsory demat of unlisted companies and Insurance policies will provide further boost to growth. We value CDSL on SoTP basis by assigning 30x to Dec-21 core profit and adding net cash to arrive at a TP of Rs 325.

CDSL has a diversified revenue stream, ~36% of the revenue is annuity in nature and ~42% is market-linked (Transaction, IPO/corporate action and KYC). The big opportunity related to demat of ~60K unlisted public companies is unfolding. At current run-rate, it will contribute ~7% to FY20 growth with negligible incremental cost. Transactions charges/KYC revenue will revive with better retail participation and improved market sentiments. New revenue streams like National Academic Depository (NAD) and e-warehouse receipts are future growth drivers. We have moderated our estimates for FY20/21E and now expect revenue/EBIT/PAT to grow at a CAGR of 12/5/6% over FY19-22E. We like CDSL based on its (1) Annuity revenue stream, (2) Cash-rich balance sheet (Net cash of Rs 6.50bn, ~30% of Mcap), (3) Option value and (4) Unlisted opportunity. Risks include regulatory changes, market slowdown and increase in competition. We maintain BUY on CDSL despite revenue and margin miss in 2QFY20. Annual issuer charges (+21% YoY in 6M) is driving growth led by the unlisted opportunity. We value CDSL on SoTP basis by assigning 30x to Sep-21 core profit and adding net cash to arrive at a TP of Rs 286.

Central Depository Services (CDSL) reported disappointing revenue in 2QFY20, which saw a steep 9.8% QoQ decline, while revenue dipped 1.9% YoY. 2QFY20 revenue came in at Rs527mn, with Depository Services revenue flattish QoQ at Rs406mn (-1% YoY), while the Data Processing segment clocked a steep 23.8% QoQ revenue decline (3.3% YoY growth). CDSL's net beneficial owner (BO) accounts touched 18.7mn (17.9mn in 1QFY20), implying 74% incremental market share. Slow revenue growth was mainly on account of decline in Transaction Charges (-10.7% YoY), IPO/Corporate Action Charges (-21.1% YoY) and KYC/Online Data Charges (-20.3% YoY), even as Annual Issuer Charges revenue grew by a healthy 20.1% YoY aided by income earned...