Motilal Oswal Maintains Neutral Rating on NSDL, Sees Target Price of Rs 1,000
Motilal Oswal Raises Earnings Estimates for NSDL
NSDL's operating revenue surged 26% year-over-year (YoY) and 27% quarter-over-quarter (QoQ) to INR4.6 billion in the fourth quarter, significantly beating estimates. This growth was primarily driven by the strong expansion of 49% YoY and 56% QoQ in the Banking Services segment.
The company's total revenue for the fiscal year 2026 (FY26) grew by 8% YoY to INR15.3 billion. Operating expenses rose 30% YoY and 40% QoQ to INR3.5 billion. Employee costs increased 29% YoY but declined 5% QoQ, while other expenses rose 30% YoY and 52% QoQ. Earnings before interest, tax, depreciation, and amortization (EBITDA) rose 14% YoY but declined 3% QoQ to INR1 billion, resulting in an EBITDA margin of 22.7%. This is lower than the 25.1% margin in the fourth quarter of FY25 and the 29.9% margin in the third quarter of FY26.
For FY26, EBITDA grew 16% YoY to INR4.3 billion. Net profit after tax (PAT) rose 8% YoY but remained flat QoQ at approximately INR903 million, beating estimates. PAT margins came in at 19.7%, lower than the 22.9% in the fourth quarter of FY25 and the 24.9% in the third quarter of FY26. For FY26, PAT grew 11% YoY to INR3.8 billion.
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The company expects employee additions to moderate in the future, with a sharper focus on automation and productivity. Technology costs are likely to remain stable in the near term, with moderation expected from FY28 onward.
| Metric | 4QFY25 | 3QFY26 | 4QFY26 | FY26 |
|---|---|---|---|---|
| Revenue Growth (YoY) | - | - | 26% | 8% |
| Revenue Growth (QoQ) | - | 56% | 27% | - |
| EBITDA Growth (YoY) | - | - | 14% | 16% |
| PAT Growth (YoY) | - | - | 8% | 11% |
| PAT Margin | 22.9% | 24.9% | 19.7% | - |
Motilal Oswal has raised its earnings estimates for FY27 and FY28 by 4% and 3%, respectively, to factor in higher banking revenue and lower cost growth. The research firm expects NSDL to post a revenue/EBITDA/PAT compound annual growth rate (CAGR) of 11%/13%/15% over FY26-28E. Motilal Oswal reiterates its Neutral rating on the stock with a one-year target price of INR1,000, premised on a price-to-earnings (P/E) multiple of 40x on FY28E earnings.
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