Central Depository Services (CDSL) has reported another impressive financial performance in 3QFY18.
Central Depository Services (CDSL) has reported another impressive financial performance in 3QFY18. Surpassing our estimates by 9%, its revenue rose by a healthy 36.1% y-o-y to Rs 51.1 crore, led by robust growth in key verticals, including Transaction Charges, IPO/Corporate Action Charges and KYC/Online Data Charges (+74%). From a segmental perspective, while revenue from Depository Services rose by 31.1% y-o-y to Rs 39.5 crore, revenue from Data Processing surged by a robust 58.1% y-o-y to Rs 10.9 crore. This impressive performance on revenue front can be attributed to good health of capital markets, with the key indices hitting all-time highs, robust primary market with new issuers coming in at a rapid rate and strong number of new demat account openings. Notably, its EBITDA margin expanded by a whopping 785bps y-o-y to 61.1%, which in absolute terms grew by 56.2% y-o-y to Rs 31.2 crore owing to operating leverage and effective cost control measures.
However, its reported PAT rose at a slower pace than EBITDA – albeit still at a healthy pace – by 25.3% y-o-y to Rs 25.4 crore owing to 38.4% y-o-y decline in lower other income led by higher yields on investments, which led to falling bond prices. Aided by all-round growth in both Depository and Data Processing segments, CDSL’s revenue grew by an impressive 36.1% y-o-y to R51.1 crore. Its revenue from Depository Services rose by 31.1% y-o-y (9.6% q-o-q) to Rs 39.5 crore, aided by healthy capital markets, strong primary market and growth in DP accounts due to increasing investor interest. Further, its revenue from Data Processing surged by a robust 58.1% y-o-y (7.7% q-o-q) to Rs 109 crore aided by healthy state of capital markets and strong downstream revenue relating to KYC services led by new demat account openings.
EBIT margin from Depository segment expanded by a strong 769 bps y-o-y, while segmental EBIT surged by 53.9% y-o-y to Rs 205 crore. On the other hand, EBIT margin from Data Processing segment rose by 313 bps y-o-y, while segmental EBIT rose by 64.6% y-o-y to Rs 87 crore. Thus, its consolidated EBIT margin rose by 673bps y-o-y to 57.5%, while consolidated EBIT surged by 54.2% y-o-y. We continue to believe CDSL’s stock is a good long-term investment in light of its highly predictable revenue model and good health of capital markets.