CDSL reported a net profit of Rs. 58 crore in the June quarter.

CDSL reported a net profit of Rs. 58 crore in the June quarter.

CDSL reported a consolidated net profit of Rs.58 crore in the June quarter as against Rs.64 crore in June 2021. The total consolidated revenue stood at Rs 140 crore, compared to Rs 117 crore in June 2021. The EBITDA for the company was at Rs. 81 crore as compared to Rs. 87 crore in June 2021. The company’s total expenses rose to Rs 66 crore from Rs 44 crore in Q1FY22. The operating profit margin for June FY22 was 53% compared to 63% for the previous year’s quarter.

Sustainable long-term growth

The transaction revenues jumped from a quarterly rate of Rs10.7 Cr in FY20 to Rs29.8 Cr/50.0 Cr in FY21/FY22 with increased market activity. However, the number of trades has been down from 170 Cr in Q4FY22 to 157 Cr in Q1FY23, partially offset by an increase in delivery proportion. Additionally, IPO-related revenues and online data charges will also be lower. Therefore, expect sequential revenue and/or EBITDA to decline by 3 or 6.5% in Q1FY23E to Rs. 130 Cr./80 Cr.
The share of market-linked businesses increased to 69% of the total mix in FY22 from an average of 50% in FY18-FY20. However, the scope for a strong market bounce-back poses upside risk. The structural script remains integral with the number of demat accounts having increased from 1.25CR in May’17 to 6.70CR in May’22, a 40% CAGR over the past 5 years. The total number of NSE-active clients has increased from 1.08 crore in Mar ’20 to 3.77 million in May ’22. The number of companies with CDSL has increased from 10,000 to 18,613 over the past 5 years. CDSL’s market share in total demat accounts has increased from 44% in FY17 to 71% in FY23. The optionalities can keep accruing. While the national academy depository has not materialised, there are several optionalities that will accrue to CDSL, such as: an increase in traction for eMargin pledge services; insurance and commodity repositories; and operations in CDSL IFSC Ltd. Risks include swings in market volumes on both sides

Valuations-

The EPS was Rs. 5.53 in the June quarter. The stock is trading at a PE ratio of 49.6x. The EBITDA was at 37.8x. The ROCE and ROE stood at 41.9% and 31.6%, respectively. The stock was trading at Rs. 16.8 on September 6th, down by 0.30%.