Multibagger stock: Up 500% in 1 year, will F&O growth lift BSE shares further?
The BSE stock is up 86 per cent in the last six months, led by market share gains, and it is currently trading at a PE of 38 times its FY25 and 30 times its FY26 earnings per share against a 5-year average 1 year forward PE of 21 times.
- Mar 29, 2024,
- Updated Mar 29, 2024 11:08 AM IST
BSE Ltd, whose shares are up over 500 per cent in the last one year, could be in for some more gains. HDFC Institutional Equities, which sees the BSE stock at Rs 3,050, said the Sensex F&O contracts have matured, commanding 40 per cent of the market share, while the BANKEX is in its build phase, currently holding a 12 per cent market share. BSE, it said, has attained a 20 per cent notional and 7 per cent premium market share, largely driven by the rising popularity of its derivatives contracts.
The scrip closed at Rs 2,525.05 on Thursday and the HDFC Institutional Equities target suggests a 21 per cent potential upside. The stock market is shut on Friday on account of Good 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," it said while suggesting a 'Buy' rating on the scrip.
The BSE stock is up 86 per cent in the last six months, led by market share gains, and it is currently trading at a PE of 38 times its FY25 and 30 times its FY26 earnings per share against a 5-year average 1 year forward PE of 21 times.
HDFC Institutional Equities' base case assumes an 11 per cent premium market share, revenue/PAT CAGRs of 44 per cent/57 per cent over FY23-26; and a core multiple of 40 times. Its bull case assumes a 15 per cent premium market share, 52 per cent/67 per cent revenue/PAT CAGRs over FY23-26, and 45 time multiple, resulting in a 66 per cent 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 said.
SGF stands for settlement guarantee fund.
The domestic brokerage expects a revenue/EPS CAGR of 34 per cent/42 per cent over FY24-26, led by a revival in transaction revenue. It maintained its 'BUY' rating and assign a SoTP-based target price of Rs 3,050, based on 40 times core FY26E PAT, the CDSL stake and net cash excluding SGF.
BSE Ltd, whose shares are up over 500 per cent in the last one year, could be in for some more gains. HDFC Institutional Equities, which sees the BSE stock at Rs 3,050, said the Sensex F&O contracts have matured, commanding 40 per cent of the market share, while the BANKEX is in its build phase, currently holding a 12 per cent market share. BSE, it said, has attained a 20 per cent notional and 7 per cent premium market share, largely driven by the rising popularity of its derivatives contracts.
The scrip closed at Rs 2,525.05 on Thursday and the HDFC Institutional Equities target suggests a 21 per cent potential upside. The stock market is shut on Friday on account of Good 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," it said while suggesting a 'Buy' rating on the scrip.
The BSE stock is up 86 per cent in the last six months, led by market share gains, and it is currently trading at a PE of 38 times its FY25 and 30 times its FY26 earnings per share against a 5-year average 1 year forward PE of 21 times.
HDFC Institutional Equities' base case assumes an 11 per cent premium market share, revenue/PAT CAGRs of 44 per cent/57 per cent over FY23-26; and a core multiple of 40 times. Its bull case assumes a 15 per cent premium market share, 52 per cent/67 per cent revenue/PAT CAGRs over FY23-26, and 45 time multiple, resulting in a 66 per cent 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 said.
SGF stands for settlement guarantee fund.
The domestic brokerage expects a revenue/EPS CAGR of 34 per cent/42 per cent over FY24-26, led by a revival in transaction revenue. It maintained its 'BUY' rating and assign a SoTP-based target price of Rs 3,050, based on 40 times core FY26E PAT, the CDSL stake and net cash excluding SGF.