CDSL stock continues to fall, plunges 16% in three sessions; Should you buy, sell or hold?

Shares of Central Depository Services Ltd. (CDSL) continued the downward trend, falling 6.41 per cent on Tuesday, January 28, marking a two-day losing streak. The drop came after the company announced its December quarter results over the weekend. CDSL stock has fallen over 16 per cent in the last three trading session.

The company posted a 21.5 per cent year-on-year growth in consolidated profit after tax (PAT), reaching ₹130 crore. CDSL reported a 14 per cent decline in revenue, primarily due to reduced transaction charges, online data charges, and other income.

On a standalone basis, the net profit for Q3 FY25 was ₹105 crore, marking a 22.09 per cent year-on-year increase but a 38.60 per cent decline quarter-on-quarter.

While higher employee and computer technology expenses offset some savings in other cost areas, margins shrank by 424 basis points quarter-on-quarter to 57.8 per cent.

Additionally, a sharp decline in other income—nearly halving—resulted in a 20 per cent quarter-on-quarter drop in net profit.

The number of net accounts opened during the quarter dropped to 92 lakh compared to 1.18 crore in the previous quarter, while income from transaction charges declined to ₹59 crore from ₹83 crore in September.

According to brokerage firm Motilal Oswal Financial Services, CDSL's ongoing investments in human resources and technology to drive future growth may limit the benefits of operating leverage. Despite this, the firm anticipates EBITDA margins to improve from 60.3 per cent in FY24 to approximately 65 per cent by FY27.

Buy, sell or hold?

Brokerage firm Nuvama has reduced its price target for CDSL to ₹1,510 from the earlier ₹1,740, while retaining its "hold" rating. The brokerage attributed this adjustment to the slow growth in secondary market volumes and the potential adverse effects on primary market activity.

Among the 10 analysts covering CDSL, two have a ‘Buy’ rating, five recommend a ‘Hold,’ and the remaining three have a ‘Sell’ rating on the stock.