HDFC Securities is bullish on CDSL has recommended buy rating on the stock with a target price of Rs 412 in its research report dated July 30, 2020.
HDFC Securities' research report on CDSL
CDSL delivered a robust performance both on the revenue and margins front, driven by traction in transaction charges (32% of revenue, +59.2% QoQ). The transaction charges surged due to high retail activity, an increase in delivery volume, and strong addition of new accounts. The COVID-19 impact was felt on KYC revenue (April and May-20) and the addition of unlisted companies. NSDL also witnessed a ~59% drop in the addition of unlisted companies. CDSL continued to gain BO account market share from NSDL (stood at 53.7% in June-20 vs. 48.4% in FY19). Its incremental market share stood at 85% due to exclusive arrangements with discount brokers. BO accounts are the building blocks for a depository and have a high correlation to revenue growth. SEBI allowed Aadhaar-based e-KYC for account opening, which will boost KYC volumes. We increase the FY21/22E EPS estimate by 20.1/16.8% due to a surge in transaction revenue and expansion in margins.
Outlook
We value CDSL on an SoTP basis by assigning 30x to June-22E core profit and adding net cash to arrive at a target price of Rs 412. The stock trades at a P/E of 25.3/22.5x FY21/22E EPS. Maintain BUY.
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