On Wednesday, ICICI Securities adjusted its outlook on Central Depository Services India Ltd (CDSL:IN) stock, increasing the price target to INR 2,235 from INR 2,142, while keeping a Hold rating. The firm underlined the company's strong position in the Indian capital market depository sector and its potential for future growth.
Central Depository Services (CDSL) is recognized for its dominant market share in the depository industry, holding approximately 77% of the demat account market as of June 2024. This leadership status is particularly notable in India's duopolistic market structure. The company's consistent non-market-linked revenue stream, mainly from annuity issuer charges, contributes to its financial stability.
The company has also demonstrated the potential for operating leverage in the future, despite the investments made in the fiscal year 2024. This is indicative of an efficient scaling of business operations that could lead to increased profitability as revenue grows while costs remain relatively fixed.
Additionally, CDSL offers diverse revenue streams, including its role as an insurance repository and income from pledge services. The company has seen a significant increase in its pledge income, rising from INR 30 million in the first quarter of fiscal year 2024 to INR 62.5 million in the same quarter of fiscal year 2025.
The financial performance of CDSL has shown a robust trend, with quarterly EBITDA climbing from an average of INR 808 million per quarter in fiscal year 2023 to INR 1,223 million per quarter in fiscal year 2024, and further to INR 1,544 million in the first quarter of fiscal year 2025. This ascending trajectory reflects the company's growing operational efficiency and earnings potential.
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