BSE shares up 416% in 1 year. Should you consider the stock post Q3 results?

Shares of BSE Ltd, which are up 416 per cent in the last one year, will be in focus on Tuesday morning as the stock exchange reported doubling of net profit at Rs 108.20 crore for the December quarter. Motilal Oswal Securities in its latest note said the profit figure was 23 per cent below its estimates.

BSE said its operating revenue was up 18 per cent sequentially and 82 per cent YoY at about Rs 370 crore, broadly in line with Motilal's estimate.

Motilal Oswal said the relaunch of BSE derivatives products has proved to be a trend-changing measure. Increased member participation, rising awareness about products, and a shift in Bankex expiry would continue to drive market share gains for BSE, the domestic brokerage said.

BSE has a 13 per cent market share in the notional turnover and 5 per cent premium turnover market share in the equity derivatives segment so far. Motilal Oswal expects BSE to scale up in these parameters going ahead.

"Other levers that will support growth over the medium term include: repricing of derivatives contracts, colocation revenues, continued momentum in the StAR MF business, growth in cash segment, possibility of levying a fee for listing of debt securities, start of operations at its Power Exchange, and commencement of revenue from its Gold Spot exchange," it said.

The brokerage has upgraded its earnings per share (EPS) estimates by 7 per cent for FY25 and 6 per cent for FY26 to factor in the higher volume trajectory for equity derivatives segment. It has reiterated its 'Neutral' rating on the BSE stock with a one-year target price of Rs 2,725, based on 35 times FY26E EPS.

BSE is developing a colocation facility - a strategic investment in the short term that will benefit in the long term. "2024 will be a transformational year as BSE is committed to growing in new areas such as expansion of data centers, new MF platform, improving clearing & settlement services, and enhancing index and data services," Motilal Oswal said.

In order to further reduce clearing and settlement costs, the exchange is trying to review the contract terms with NSCL and increase its institutional presence, for which it is closely working with FPIs as DIIs do not have a lot of scope to increase activity, Motilal Oswal said.

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