Brokerage Motilal Oswal has maintained a 'Neutral' rating on NSDL with a target of ₹800 per share, citing valuation concerns despite a positive earnings outlook. The firm raised its profit estimates for FY27 and FY28 by up to 10% following a robust revenue increase in Q2. Investors are now watching whether the company can control rising technology costs while balancing volatility in its banking services segment.
Brokerage firm Motilal Oswal has maintained its 'Neutral' rating on National Securities Depository Limited (NSDL), assigning a target price of ₹800 per share. This decision follows NSDL’s second-quarter earnings results, which showed strong revenue growth but highlighted ongoing operational challenges. The brokerage’s decision to keep a neutral stance reflects a balance between the company's long-term growth potential and current valuation concerns.
NSDL’s financial performance for the second quarter presented a mixed picture for investors. While the company reported a consolidated revenue growth of 36.5% year-on-year, profit after tax growth was more modest at 10.9%. This difference between revenue gains and profit expansion is largely attributed to higher costs associated with technology modernization and digital infrastructure investments. The company is currently absorbing these expenses, which is putting pressure on its profit margins.
The performance across the company’s business segments also shows uneven trends. The core depository operations segment remains a strong driver of the business and showed growth during the quarter. In contrast, the banking services segment, which makes up a significant portion of the total revenue, experienced a 7% decline on a quarter-on-quarter basis. This volatility in the banking segment is a key area that market analysts are watching, as it influences the overall revenue quality and consistency.
Despite the neutral rating, Motilal Oswal has adjusted its expectations for the future, raising earnings estimates for fiscal years 2027 and 2028 by 10% and 9%, respectively. The brokerage projects a revenue compound annual growth rate of 32% through the end of fiscal year 2028. The target price of ₹800 is calculated based on a valuation multiple of 35 times the projected earnings for FY28. Currently, the stock is trading in the range of ₹720 to ₹730, which is notably lower than its 52-week high of ₹1,180.
For investors, the most important factors to track moving forward will be the company’s ability to manage its technology-related expenses and the recovery or stabilization of the banking services segment. While NSDL maintains a significant market share in the depository space, sustaining profit margins while continuing to spend on new digital capabilities remains a hurdle. Investors may monitor future quarterly reports to see if the company can effectively manage these costs and translate its revenue growth into better bottom-line performance.