Are C D S L latest results good or bad?

The latest financial results for Central Depository Services Limited (CDSL) present a mixed operational picture. In Q2 FY26, the company reported net sales of ₹258.81 crores, reflecting a sequential increase of 15.31% from the previous quarter, although year-on-year growth was marginal at just 0.55%. This indicates some resilience in revenue generation despite a challenging market environment.
However, the profitability metrics reveal underlying pressures. The net profit for the quarter was ₹102.37 crores, which represents a slight sequential increase of 2.05%, but a significant year-on-year decline of 23.72%. This decline in profitability is attributed to rising operational costs, particularly a notable increase in employee expenses, which surged by 45.87% year-on-year. Additionally, the operating margin contracted to 50.40%, down from 60.00% in the same quarter last year, highlighting the impact of cost pressures on profitability.

The company also faced a higher tax burden, with the effective tax rate rising to 32.27%, which further impacted the net profit. Despite these challenges, CDSL maintains a strong return on equity (ROE) of 26.52%, indicating effective capital utilization.

Overall, while CDSL demonstrated sequential revenue growth, the year-on-year performance reflects significant challenges, particularly in profitability and margin compression. The company saw an adjustment in its evaluation, reflecting these mixed operational trends and the pressures from rising costs and tax rates. Investors should closely monitor the company's ability to manage costs and restore margin momentum in the upcoming quarters.