CDSL: CDSL delivered a robust performance, driven by traction in transaction charges (34% of revenue, +48.2% QoQ). The transaction charges surged due to high retail activity, an increase in delivery volume, and strong addition of new accounts (+35% YoY). Increase in pledge activity due to change in regulations will further boost transaction revenue in 2H. Online data charges (+32% QoQ) revived, led by a strong increase in KRA records (+26% YoY). The pandemic has led to increased demand for Digital services (virtual AGMs, e-voting, Aadhaar based e-KYC, etc.) and CDSL is the prime beneficiary. CDSL continued to gain BO account market share from NSDL (stood at 56.1% in Sep-20 vs. 51.8% in FY20). Its incremental market share stood at 87% due to exclusive arrangements with discount brokers. BO accounts are the building blocks for a depository and have a high correlation to revenue growth. Margin expanded 264bps QoQ to 60.9% and was in line with expectation. We increase the FY22/23E EPS estimate by +9.1/+8.2% due to a surge in transaction revenue. We value CDSL on SoTP basis by assigning 30x to Sep-22E core profit and adding net cash to arrive at a target price of Rs 565. The stock trades at a P/E of 25.6/23.4x FY21/22E EPS. Maintain BUY. ICICI Prudential Life: We like IPRUs re-engineered business model, which is focused on a more diversified product mix (increasing PAR + NPAR) along with an increased protection share. This is expected to drive margins higher by 405bps YoY in FY21E to 25.8%. We expect VNB to grow...

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.

We value CDSL on SoTP basis by assigning 30x to FY22E core profit and adding net cash to arrive at a TP of Rs 325. Maintain BUY. CDSL delivered robust performance in a challenging environment. Both revenue and margin were higher than estimate, and the company's operation is not impacted due to Covid-19. The transaction charges increased for the second consecutive quarter and KYC revenues have surged. SEBI recently allowed Aadhaar based e-KYC for account opening, which will further boost CVL-KYC volumes. CDSL continued to gain BO account market from NSDL (stood at 52.4% in April-20 vs. 48.4% in FY19).

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...

Central Depository Services (CDSL) was set up in 1999, is the leading depository in India in terms of incremental market share, garnering 63% share of incremental demat accounts in FY19. CDSL offers dematerialisation for equity and preference shares, MF units, debt instruments and G-Secs. It also offers corporates facilities to credit securities to BO demat accounts in order to effect corporate actions. CDSL also offer other online services such as e-voting, e-Locker, National Academy Depository, easi (Electronic Access to Security Information), easiest (Electronic Access to Security Information and Execution of Secured Transaction) drafting and preparation of wills for succession...

CDSL has a diversified revenue stream, ~33% of the revenue is annuity and ~40% is market-linked (and uncertain). Huge opportunity for demat of ~60K unlisted public companies is now bearing fruits. At current run-rate, it will contribute ~7% to growth with negligible incremental cost. Transactions charges/KYC revenue will revive with better market conditions. New revenue streams like National Academic Depository (NAD) and e-warehouse receipts will start contributing only from 2HFY20E. We like CDSL based its (1) Annuity revenue stream, (2) Cash-rich balance sheet (Net cash of Rs 6.50bn, ~32% of Mcap), (3) Option value and (4) Unlisted opportunity. We expect CDSL revenue/EBITDA/PAT to grow at a CAGR of 14/11/8% over FY19-21E. Risks include regulatory changes, market slowdown and increase in competition. We maintain BUY on CDSL post higher revenues but lower margins in 1QFY20. Annuity revenue (+23% YoY) is driving growth led by the unlisted opportunity. Our SoTP of Rs 320 is based on 30x core FY21 earnings plus net cash.

Revenue Impresses; Profitability Down Steeply On Wage Hikes Central Depository Services (CDSL) reported a robustly improved revenue performance in 1QFY20, for the second successive quarter after a poor show in 3QFY19, when revenues dipped steeply by >10% YoY and >13% QoQ. In 1QFY20, revenue rose strongly by 28.2% YoY and by 14.6% QoQ to Rs584mn, its highest-ever quarterly revenue. Depository Services revenue saw a healthy recovery after two successive quarters of YoY decline, with segment revenue up 11.4% YoY to Rs405mn. On the other hand, the Data Processing segment clocked a substantial 86.6% YoY revenue growth. CDSL's net beneficial owner (BO) accounts touched 17.9mn (17.3mn in 4QFY19),...

CDSL has a diversified revenue stream, ~35% of the revenue is of annuity nature and ~47% is market linked (Transaction, IPO/corporate action and KYC). Big opportunity is emerging with the demat of ~60K unlisted public companies. The opportunity size is ~Rs 0.12bn per year (taking ~50% share) with negligible incremental cost. CVL KYC issues are behind and growth with resume with revised e-KYC regulations. New revenue streams like National Academic Depository (NAD) and e-warehouse receipts will start contributing meaningfully in 2HFY20E. We like CDSL based its (1) Annuity revenue stream, (2) Cash rich balance sheet (Net cash of Rs 6.53bn, ~28% of Mcap), (3) Option value and (4) Unlisted opportunity. We expect CDSL revenue/EBITDA/PAT to grow at a CAGR of 11/14/10% over FY19-21E. Risks include regulatory changes, market slowdown and increase in competition. 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 SoTP basis by assigned 30x multiple to core FY-21 earnings and adding net cash to arrive at a TP of Rs 335.

Revenue growth impacted due to market headwinds leading to negative operating leverage: For 3QFY19, CDSL's revenue declined 10% YoY to INR462mn. This was majorly due to reduction in IPO/ Corporate Action charges (-52% YoY) followed by Transaction charges (-25%), Online Data charges (-8%) and other charges (-8%). IPO revenue got impacted due to reduction in number of IPOs given weak market sentiment. Revenue from Transaction charges reduced due to poor delivery based volume during Q3FY19. However, we expect revenues to revive in 2HFY20E following...

We maintain our BUY rating, have assigned 30x multiple to core Dec-20 earnings and added back net cash to arrive at a TP of Rs 330 (~46% upside). CDSL posted disappointing 3QFY19, both revenue and margin performance were lower than expectations. Revenue was down 13.1% QoQ to Rs 462mn (vs est. of Rs 549mn). Drop was led by 7.4/30% QoQ drop in Transaction/Online-data-charges revenue (CVL KYC). Discontinuation of OTP based Aadhaar e-KYC has led to lower volumes from the on-line channel.

Central Depository Services (CDSL) is one of two depositories in India and the only one to be listed. The BSE initially promoted CDSL,but subsequently diluted its stake to leading banks, which became CDSL's 'Sponsors'.

We maintain our BUY rating, have assigned 33x multiple to core Sep-20 earnings and added back net cash to arrive at a TP of Rs 380 (~59% upside form CMP). CDSL posted robust 2QFY19, both revenue and margin performance was better than expectation. Revenue was up 17.4% QoQ to Rs 531mn (vs est. of Rs 433mn). Growth was led by 6.2/48.5% QoQ rise in Transaction/Online data charges revenue (MF KYC). Discontinuation of OTP based Aadhaar KYC for MFs led to surge in demand for CVL KYC.

Central Depository Services (CDSL) 1QFY19 operating performance was in line, but lower other income weigh on PAT. Owing to the volatile capital markets, key segments (except data processing) grew at subdued pace. Data...

We maintain our BUY rating, have assigned 33x multiple to core earnings and added back net cash to arrive at a TP of Rs 370 (39% upside from CMP). CDSL posted poor 1QFY19 with fall in revenue but margin was better than expectation. Revenue was down 12.5% QoQ to Rs 453mn (lower than our est of Rs 505mn). Drop was led by 21.3/27.3/18.2% QoQ drop in Transaction/IPO & corporate action/online data charges respectively offset by 6.7% QoQ rise in annual issuer charges. Margin fall was lower than expected, down 24bps QoQ to 56.8% vs our estimate of 55.4%. CDSL continued to gain BO market share (~47% in 1QFY19, +48bps QoQ).

Revenue In-line; Lower Other Income Reduces PAT Central Depository Services (CDSL) has reported an in-line revenue performance in 1QFY19, which rose 11.7% YoY (-12.5% QoQ) to Rs453mn (1.5% above our estimate). Key business segments grew at a subdued pace with a marked slowdown from growth recorded in the previous quarter. Transaction Charges revenue rose by 7% YoY (42% YoY in 4QFY18), IPO/ Corporate Action Charges revenue rose by 8.6% YoY (70.8% YoY in 4QFY18) and KYC/Online Data Charges rose by 11.2% YoY (59.9% YoY in 4QFY18). Segment-wise, Depository Services revenue rose by 18.5% YoY to Rs352mn. On the flip side, Data Processing revenue declined by...

Central Depository Services (India) (CDSL) stable revenue base and fixed cost model enables the company to register strong margins in line with revenue growth. Repeat business in multiple offerings across DP's, corporate, capital market intermediaries, insurance companies and others has enabled the company to clock ~21% CAGR top-line growth over FY14-FY18, while cost (employee) increased by only 14% during the same period. High FCF generation, stable dividend policy (~40%) and a strong balance sheet (net cash of Rs5.5bn, at end of FY18) provide further support. Stable growth in...

We assign a P/E multiple of 33x to core earnings and add net cash to arrive at a TP of Rs 415 (40% upside from CMP). At 25/21x FY19/20E earnings we see value and maintain our BUY rating. CDSL posted a muted 4QFY18 with flat revenue and lower margins. Revenue was up 0.8% QoQ to Rs 518mn (in-line with our est of Rs 518mn). Growth was led by 5.8/7.7% QoQ growth in Annual issuer charges/online data charges (KYC) offset by 3.5/2.8% fall in transaction revenue/IPO & corporate action charges respectively.