The Pitch: BSE Ltd - BUY - TP Rs.1170 - Kotak Securities

- BSE owns and operate the first stock exchange in Asia, which was formed in 1875. At the end of August 2017, BSE was the world's largest exchange by number of listed securities (5,794 securities), and India's largest and the world's 10th largest exchange by market capitalization.

- BSEs net cash as of March 2017 stands at Rs.29.2 bn (51% of market cap) and offers a dividend yield of 2.3% as it pays-out 70-75% of its profits;

- Focusing on new segments with significant potential: All is not lost with NSE taking home the equities business, as BSE is leaving no stone unturned to stay ahead in the emerging segments which offer rich potential, including: Currency derivatives, Interest Rate derivatives, SME platform, MF platform. As of FY17, BSE enjoys a much healthy market share in these segments:

- Structural changes to drive long term growth
- Strengthened its position as the exchange of choice and expanded cross-border reach via strategic alliances:
- Technology prowess is an encouraging backbone
- Outlook & Valuation: The stock has corrected about 17% from its 52-week high and currently trades at 24.6x its FY2017 earnings. On a forward basis, the stock is trading at 23.5x and 22.2x FY18 & FY19 earnings respectively. We value BSE on a P/E basis at 26.2x its FY2019E earnings, resulting in a target price of Rs.1,170.

Source : Equity Bulls

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