Central Depository Services (India) Ltd. share price target

Central Depository Services (CDSL) reported an in-line financial performance in 4QFY18. The company's revenue rose by a healthy 35.1% YoY to touch Rs518mn (17.5% above our estimate). This was led by robust growth in key verticals, including Transaction Charges (+42% YoY), IPO/ Corporate Action Charges (+70.8%) and KYC/Online Data Charges (+59.9%). On a segmentwise basis, Depository Services revenue rose by 31.6% YoY to touch Rs390mn. On the other hand, Data Processing revenue rose by a strong 39.2% YoY to touch Rs116mn. Impressive revenue growth was attributable to good health of capital markets, a strong primary market with new issuers coming in at a good pace and strong demat account openings. CDSL's strong focus on marketing and increasing DPs continues to drive revenue, with total net beneficial...

In FY18, CDSL reported a strong growth in consolidated net sales of 31% YoY, driven by high growth in IPO/corporate action charges, transaction charges and KYC segment. Consolidated PAT came in at INR 1bn (+20% YoY), in-line with our estimates. Fixed cost model driven primarily by staff and IT costs enables the company to register strong margins in tandem with revenue growth. High FCF generation (FCF yield c.4%+), stable dividend policy (35% payout) and a strong balance sheet (net cash INR 5.5bn+) provide further support. SEBI panel's likely recommendation to allow new entrants in depository space may increase the competition intensity. We forecast a c.20% EPS CAGR over FY18-FY20E and...

CDSL is a story of two halves an existing granular revenue stream and a growing optionality from digitization. A deeper look at CDSLs revenue reveals even the sub heads (transaction income, IPO corporate charges) emanate from diverse set of small fees that CDSL charges.

We assign a P/E multiple of 33x to core earnings and add net cash to arrive at a TP of Rs 425 (47% upside from CMP). At 24/21x FY19/20E earnings, value is imminent and merits a BUY. Central Depository Services Ltd (CDSL) is one of two depositories in India and the only one to be listed. Given the high risk of data pilferage, we believe there is limited scope for any other depository to be set up. CDSL is a gem of a business that any investor constructive on India in the long term must own. It has a robust business model, with (1) One-third of revenues being annuity (issuer charges), (2) Embedded non-linearity playing out (1,502 bps margin expansion over FY13-17), (3) Low capex requirement (~3% of revenue), (4) Excellent cash generation (OCF ~63% of EBITDA) and (5) Huge option value from new areas like digitisation of academic records and insurance policies, e-warehouse receipts and GST Suvidha centres.

Processing surged by a robust 58.1% YoY to Rs109mn. This impressive performance on revenue front can be attributed to good health of capital markets, with the key indices hitting all-time highs, robust primary market with new issuers coming in at a rapid rate and strong number of new demat account openings. Notably, its EBITDA margin expanded by a whopping 785bps YoY to 61.1%, which in absolute terms grew by 56.2% YoY to Rs312mn owing to operating leverage and effective cost control measures. However, its reported PAT rose at a slower pace than...

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....

We initiate with buy for a price target of Rs 292 (FY20 target P/E) representing an upside potential of 96% (from the upper price band of 149) over the next 21 months.

Central Depository Services (India) Ltd. (CDSL) is a leading securities depository in India by incremental growth of Beneficial Owner (BO) accounts over the last three years and by the total number of registered Depository Participants (DPs), as at the end of FY16. However, in...

IPO Note - Central Depository Services (India) Ltd Issue Open: June 19 - June 21 2017, Price Band: Rs. 145 - 149