Mr. Amit Chandra, Institutional Research Analyst, HDFC Securities and Mr. Mohit Motwani, Institutional Research Analyst, HDFC Securities
CDSL delivered a strong revenue performance (+19.7% QoQ), driven by transaction and online data charges (KYC) revenue. Key attributes that underscore our positive stance include (1) strong momentum in transaction revenue (+178% in FY21), driven by retail activity (online brokers) and pledge income; (2) continued gain in BO account market share (+770bps YoY to 60.7%); (3) sustained growth in annual issuer charges (annuity income), led by BO accounts addition and unlisted opportunity; (4) investment in technology for enhanced security; (5) high cash generation (OCF/EBITDA of 90%) and high net cash of INR 9.1bn (11% of MCap); and (6) +18/20% revenue/EBITDA CAGR over FY21-23E, following a strong FY21. Operating margin contracted 220bps QoQ to 59.9% (stood lower than the estimate) due to wage hike and higher investments in technology (cybersecurity). We increase our revenue estimates for FY22/23 by 10.9/12.8% and raise the target multiple to 35x (from 33x earlier). FY22/23E EPS increases by 8.5/10.1%. We value CDSL on an SoTP basis by assigning 35x to FY23E core profit and adding net cash to arrive at a target price of INR 870. The stock trades at a P/E of 34.1/29.3x FY22/23E EPS. Maintain BUY.
4QFY21 highlights: CDSL revenue stood at INR 1.03bn (+19.7/+72.1% QoQ/YoY), higher than our estimate of INR 0.92bn. Annual Issuer/Transaction/IPO/KYC revenue was up +1.8/+19.8/+87.6/+52.9% QoQ. Revenue from others was down 19.1% QoQ due to lower e-voting and e- CAS revenue. Other income declined 58% QoQ due to M2M losses. On the cost front, Employee/Technology/Other cost was up 20.4/15.2/42.8%, leading to EBITDA margin contraction of 353bps QoQ. The other expenses were higher due to greater provisions and an increase in SMS cost due to Pledge authentication.
Outlook: We expect revenue growth of +21.6/+15.4 and an EBITDA margin of 63.6/64.4% in FY22/23E. The revenue CAGR of 18% over FY21-23E assumes +18/18/27/27% revenue CAGR in Issuer/Transaction/ IPO/KYC revenue. Core PAT CAGR over FY21-23E is at +22%.