There may be more gains ahead for BSE Ltd., whose shares have increased by more than 500% in the past year. According to HDFC Institutional Equities, which values the BSE stock at Rs 3,050, the BANKEX is still in its construction phase with a current market share of 12%, while the Sensex F&O contracts have matured and now demand 40% of the market share.
According to the statement, BSE has achieved a market share of 20% notional and 7% premium, mostly due to the increasing demand for its derivatives contracts.
The share finished at Rs 2,525.05 on Thursday, and the target of HDFC Institutional Equities indicates a possible upside of 21%. Good Friday causes the stock market to be closed on Friday.
“We believe the derivative growth for BSE will continue to be led by the scaling of the BANKEX contract, the go-live of large discount brokers, a higher volume of algo and proprietary traders, an increase in active UCCs, and greater participation of FPIs.”
With improvements in market share driving an 86% increase in the last six months, the BSE stock is now trading at a PE of 38 times FY25 and 30 times FY26 profits per share, compared to a 5-year average 1 year ahead PE of 21 times.
The base scenario for HDFC Institutional Equities estimates an 11% premium market share, revenue/PAT CAGRs of 44% and 57% from FY23 to FY26, and a core multiple of 40 times. In its bull scenario, a 15% premium market share, 52%/67% revenue/PAT CAGRs over FY23–26, and a 45-time multiple are assumed, which translates into a 66% upside from CMP.
“The core SGF pool is increasing across exchanges, led by regulatory initiatives aimed at risk mitigation. In 9MFY24, the core SGF contribution has increased time 2.5 times vs FY23. BSE core SGF pool is in line with the industry and will increase with the rise in volumes.”
“The settlement costs for BSE are 2.5 times that of NSE, we expect these to come down gradually as economies of scale come into play. Assuming a premium market share of 11 per cent in FY26E and current pricing, derivatives will contribute 43 per cent of BSE’s total revenue and 53 [er cent of Ebitda,”
HDFC Institutional Equities
