Neutral CDSL Ltd For Target Rs.1,300 by Motilal Oswal Financial Services Ltd
Strong all-round beat
* CDSL’s operating revenue rose 24% YoY/35% QoQ to INR3.9b (14% beat). Standalone depository income grew 25% YoY/37% QoQ to INR3.4b. For 1HFY27, revenue grew 19% YoY.
* Operating expenses grew 18% YoY/7% QoQ to INR1.7b (in-line), driven by 11%/20% YoY increase in employee costs/other expenses. Strong revenue growth resulted in 23% EBITDA beat, which rose 29% YoY/66% QoQ to INR2.3b, resulting in EBITDA margin of 57.9% (vs. 55.7% in 2QFY26 and MOFSLe – 53.5%).
* Strong operational performance and other income beat lead to 33% PAT beat, which rose 24% YoY and 47% QoQ to ~INR1.7b. For 1HFY27, PAT grew 20% YoY.
* KYC pricing impact was limited, as higher KYC account creation and fetch volumes largely offset the price cut. Higher IPO activity and an increasing number of prospectuses filed provide a strong growth opportunity for the IPO and corporate actions business going forward.
* We have increased our FY27/FY28 earnings estimates by 15%/15% based on strong 2QFY27 performance. We expect revenue/EBITDA/PAT CAGR of ~16%/17%/16% over FY26–28, and reiterate a Neutral rating with a oneyear TP of INR1,300 (45x FY28E P/E).
Key takeaways from the management commentary
* There is a need for continuous tech innovation to adapt to evolving market dynamics, with investments focused on improving operational efficiency and client experience.
* Rack rates stand at INR5 for KYC creation and INR28 for KYC fetches.
* CDSL has separately introduced Aadhaar-based e-KYC, which entails additional charges on records processed.
Valuation and view
* CDSL continues to benefit from structural tailwinds, supported by healthy issuer additions, rising AUC, resilient transaction activity, and strong IPO momentum. The impact of KYC pricing revisions has been largely mitigated by higher volumes. CDSL will continue to invest in technology, with a focus on improving operating efficiency and client experience.
* We have increased our FY27/FY28 earnings estimates by 15%/15% based on strong 2QFY27 performance. We expect revenue/EBITDA /PAT CAGR of ~16%/17%/16% over FY26–28 and reiterate a Neutral rating with a one-year TP of INR1,300 (45x FY28E P/E).
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