After a rally of 119% in six months, analysts see upside of 22% in this duopoly business

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The ongoing bull run and the flurry of investors flocking into Dalal Street has been beneficial for India’s largest depository, CDSL that has over 4 crore demat accounts. The rise in investor accounts is also visible in its share price that has more doubled or surged over 119% in the last six months from Rs 554 on February 18, 2021, to Rs 1,214 on August 18 (at 12:00 pm.)

Financials

That apart the record number of new investor accounts is reflected in its financials as well the company reported healthy revenue growth of 79.7% year-on-year (Y-o-Y) to Rs 117.3 crore. While on the profitability front, the EBITDA (earnings before interest tax depreciation and amortization) from operations for the quarter improved by 93.7% (Y-o-Y) at Rs 73.7 crore with an operating margin of 62.9%. The company reported a PAT (profit after tax) of Rs 63.9 crore, a growth of 38.4% (Y-o-Y) with a net margin of 54.5%.

What’s next?

CDSL has three subsidiaries CDSL Ventures Ltd. (CVL), CDSL Insurance Repository Ltd. (CIRL), CDSL Commodity Repository Ltd. (CCRL) having strong business, which contribute to the strength of the company.

CVL is the first and the largest KYC Registration Agency (KRA) in the country with over 3.10 crore fully digitised KYC records as of June 2021. CVL provides eKYC services, esign services, facilitates intermediaries to upload their KYC records in the CKYC, providing validation of Aadhar & PAN, online account application software, undertaking SEBI special projects. CVL is also a leading GST Suvidha provider.

On the other hand, CIRL is an Insurance Repository and has 0.64 million e-insurance accounts. CCRL operates under the regulatory authority of warehouse development and regulatory authority, it has 3328 registered warehouses.

Citing this Anand Rathi is bullish on the counter and has a buy rating on the stock with a price target of Rs 1,480 an upside of 22% from current prices. “Within financial assets, the allocation towards equities has been rising as retail investors have usually been under-invested in equities. CDSL stands to benefit with growth in capital markets. Also, increasing thrust on digital account opening & online initiatives create further optimism,” stated the brokerage firm in a report.

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