HDFC Securities is bullish on Central Depository Services has recommended buy rating on the stock with a target price of Rs 330 in its research report dated January 29, 2019.
HDFC Securities' research report on Central Depository Services
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. Margin contracted 1,245bps QoQ to 49.4% vs our est. of 62% led by fall in revenue and higher provisions (adjusted margin was down 595bps QoQ to 56%). CDSL continued to gain BO market share (48% in 3QFY19, +48bps QoQ). Incremental market share for CDSL stood at 63% which indicates DPs preference of CDSL over NSDL.
Outlook
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).
For all recommendations report, click here
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