Company Update : CDSL by Motilal Oswal Financial Services Ltd
PAT miss led by operational inefficiencies
* CDSL’s operating revenue grew 1% YoY and 15% QoQ to INR2.6b (8% miss), primarily due to 49%/31% YoY decline in IPO & corporate action charges/online data charges.
* EBITDA declined 16% YoY (up 19% QoQ) to INR1.3b, resulting in EBITDA margin of 50.4% (vs. 60% in 1QFY25 and 48.7% in 4QFY25).
* Operating expenses rose 25% YoY to INR1.3b, driven by 46%/17% YoY increase in employee costs/other expenses.
* Other income increased by 23% YoY and 16% QoQ to INR364m.
* Tax provisions were 48% higher than estimates at INR488m, leading to a higher tax rate of 32% in 1QFY26 vs. 23% in 1QFY25 and 21% in 4QFY25.
* PAT declined 24% YoY (up 2% QoQ) to ~INR1b (28% miss due to operational inefficiencies). PAT margins came in at 39.6% vs. 52.1% in 1QFY25 and 44.8% in 4QFY25.
Valuation and view
* Continued investments in human resources and technology for future growth could restrict gains from operating leverage, though we still expect EBITDA margins to expand to ~58.9% in FY27E from 57.7% in FY25.
* We estimate a CAGR of 18%/19%/18% in revenue/EBIDTA/PAT for CDSL over FY25-27E. We reiterate our Neutral rating on CDSL with a one-year TP of INR1,570 (based on a P/E multiple of 45x FY27E).
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