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Investment Research Report: Central Depository Services (India) Ltd (CDSL)
Date: May 25, 2025
Analyst Rating: Buy
Target Price (12 Months): ₹1,650 – ₹1,800
Current Price: ₹1,462.30 (as of May 23, 2025)
Investment Horizon: Medium to Long Term (6–12 months)
1. Company Overview
Central Depository Services (India) Ltd (CDSL) is one of India’s two central securities depositories, alongside NSDL. Established in 1999, CDSL facilitates the holding and transfer of securities in electronic form, playing a pivotal role in India’s capital markets. It is particularly dominant in the retail segment, managing over 14.93 crore demat accounts as of FY24, significantly surpassing NSDL’s 3.88 crore accounts.
2. Financial Performance
FY25 Highlights:
- Total Income: ₹1,199 crore
- Profit After Tax (PAT): ₹526 crore
- Net Profit Margin: 43.9%
- Earnings Per Share (EPS): ₹25.6
- Market Capitalization: ₹30,562 crore
- Price-to-Earnings (P/E) Ratio: 58.1
- Price-to-Book (P/B) Ratio: 20.0
Q4 FY25 Performance:
- Net Profit: ₹100.31 crore, down 22% YoY
- Revenue: ₹255.78 crore, down 7% YoY
- Total Expenses: ₹129.40 crore, up 28% YoY
Despite a sequential decline in quarterly profits, the company maintains robust year-over-year growth, underscoring its strong operational efficiency.
3. Peer Comparison: CDSL vs. NSDL
| Metric | CDSL | NSDL |
|---|---|---|
| Demat Accounts | 14.93 crore | 3.88 crore |
| Demat Custody Value | ₹72.18 lakh crore | ₹470.38 lakh crore |
| Total Income (FY24) | ₹907 crore | ₹1,365 crore |
| PAT (FY24) | ₹420 crore | ₹275 crore |
| Net Profit Margin | 46% | 20% |
| P/E Ratio | 63.1 | 87.07 |
| P/B Ratio | 22.75 | 15.90 |
Insights:
- Retail Dominance: CDSL leads in the number of demat accounts, reflecting its strong presence in the retail investor segment.
- Profitability: Higher net profit margins and lower P/E ratio suggest CDSL’s superior profitability and more attractive valuation compared to NSDL.
- Custody Value: NSDL holds a higher custody value, indicating its strength in institutional holdings.
4. Technical Analysis
- Support Levels: ₹1,400 – ₹1,420
- Resistance Levels: ₹1,500 – ₹1,520
- Next Target: ₹1,650 (upon sustaining above resistance)
Technical indicators suggest that CDSL has rebounded from key support zones. Sustained trading above the ₹1,500–₹1,520 range could pave the way for a move towards ₹1,650.
5. Valuation and Price Targets
Brokerage Recommendations:
- Angel One: Buy with a target price of ₹1,420; stop loss at ₹1,246.
Long-Term Projections:
- 2025: ₹1,650 – ₹1,800
- 2030: ₹5,540 – ₹6,283
These projections are based on continued growth in retail participation and digital financial services.
6. Investment Rationale
Strengths:
- Retail Market Leadership: CDSL’s dominance in the retail segment positions it well to capitalize on India’s growing retail investor base.
- High Profitability: Superior net profit margins and efficient operations enhance shareholder value.
- Digital Expansion: Initiatives in e-KYC, e-signatures, and other digital services through its subsidiary CVL diversify revenue streams.
Risks:
- Valuation Concerns: High P/E and P/B ratios may limit short-term upside.
- Market Volatility: Fluctuations in market activity can impact transaction-based revenues.
- Regulatory Changes: Potential changes in regulations could affect operational dynamics.
7. Conclusion
CDSL’s strong foothold in the retail segment, coupled with its high profitability and strategic digital initiatives, make it a compelling investment for medium to long-term investors. While valuations are on the higher side, the company’s growth prospects and market position justify a Buy recommendation.
Investment Strategy:
- Entry Point: Accumulate at current levels (₹1,462.30), especially on dips towards ₹1,400.
- Target Price (12 Months): ₹1,650 – ₹1,800
- Stop Loss: ₹1,350
