Company Update : CDSL Ltd by Motilal Oswal Financial Services Ltd
Overall strong quarter
* CDSL’s operating revenue declined 1% YoY but grew 23% QoQ to INR3.2b (7% beat). The QoQ growth was driven by a 195% growth in IPO and corporate action charges and 28% growth in online data charges. For 1HFY26, revenue remained flat YoY to INR5.8b.
* EBITDA declined 11% YoY but rose 36% QoQ to INR1.8b, resulting in an EBITDA margin of 55.7% (vs. 62% in 2QFY25 and 50.4% in 1QFY26). For 1HFY26, EBITDA declined 13% YoY to INR3.1b.
* Operating expenses grew 15% YoY to INR1.4b, driven by 32%/10% YoY increase in employee costs/other expenses.
* Other income declined 38% YoY and 38% QoQ to INR225m.
* Tax provisions were 28% lower than estimates at INR427m, leading to a lower tax rate of 23% in 2QFY26 vs 28% in 2QFY25 and 32% in 1QFY26.
* PAT for the quarter declined 14% YoY but rose 37% QoQ to ~INR1.4b (18% beat due to operational efficiencies). PAT margins came in at 43.9% vs 50.3% in 2QFY25 and 39.6% in 1QFY26. For 1HFY26, PAT declined 18% YoY.
Valuation and view
* Continued investments in human resources and technology for future growth could restrict gains from operating leverage; however, we still expect EBITDA margins to remain at over 52%.
* We estimate a CAGR of 13%/11%/11% in revenue/EBIDTA/PAT for CDSL over FY25-28E. We reiterate our Neutral rating on CDSL with a one-year TP of INR1,520 (based on a P/E multiple of 45x FY27E).
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