Jefferies maintained its “hold” rating on CDSL in its note on Thursday, September 10, with a price target of ₹1,315. This nearly the same levels at which the stock closed on Wednesday (₹1,367).
The brokerage wrote in its note that a pick-up in demat account openings, coupled with a strong IPO pipeline, has piqued investor interest in CDSL.
India added nearly 33 lakh new demat accounts in August, taking the total figure to 23.77 crore led by an increase in retail investor interest and a strong IPO market. This was the highest monthly addition since January this year and also the third straight month of growth.
Historically, large IPOs have positively impacted 50% of CDSL’s operating revenues, according to Jefferies, who went on to add that large IPOs lined up this year could add another 3% to 4% to CDSL’s earnings, which they now factor into their two-year Earnings Per Share (EPS) growth estimate of 19% CAGR.
Why No Upgrade For CDSL?
CDSL is currently trading at 50 times its one-year forward estimated Earnings Per Share (EPS), which is well below its historical peak multiples of 80 times.
However, Jefferies finds a revision in CDSL’s recommendation to be difficult as its scarcity premium has eroded and rising competition is also narrowing the margin gap.15 analysts have coverage on CDSL, of which, six of those have a “buy” rating, four say “hold” and five have a “sell” rating on the stock. The consensus estimates of price targets implies a downside potential of 4.2% from current levels.
Shares of CDSL ended 2.4% lower on Wednesday at ₹1,367. The stock is down 5.5% so far this year.
