Maintain BUY on BSE - Taking steps to accelerate growth - HDFC Securities

Mr. Amit Chandra, Institutional Research Analyst, HDFC Securities

BSE revenue declined 3.8% QoQ due to lower market-linked revenue (core transaction and book building). The StAR MF platform volume witnessed a growth of +14/+71% QoQ/YoY, but the pricing has been renegotiated at INR 5/transaction (~30% lower). The growth in StAR MF will be volume led and stake sale will lead to value unlocking. BSE cash market share further slipped to 5.9% (-80bps YoY), the increase in transaction charges by ~20% (effective March-21) will provide some boost to transaction revenue. BSE is also trying to rebuild the derivative volume, the current market share is ~7%, but it can be a potential revenue driver. New initiatives like the Insurance platform, Power, and Spot exchange are promising, but currently there is less clarity. INX volume is growing at ~90% YoY, and we expect it to break even in FY23E. We assign an SoTP-based target price of INR 700 by assigning 10x to core Dec-22E PAT (INR 123/share), INR 180/share for the CDSL stake taking 25% discount, and adding net cash excluding SGF and clearing cash (INR 397/share). Maintain BUY.

3QFY21 highlights: Revenue was down 3.8% QoQ to INR 1.21bn vs. est. of INR 1.31bn. Transaction/annual listing/book building revenue was up +4.3/+2.1/-48.1% QoQ. Core cash transaction revenue was down 12.9% QoQ. INX ADTV stood at USD 7.5bn (+227% YoY) and the number of daily trades was at 178K (+195% YoY). EBITDA margin declined to 9.9% in the quarter but will improve with growth.

Outlook: We expect revenue growth of +6.8/18.3/+13.5% and an EBITDA margin of 9.5/18.0/22.7% in FY21/22/23E respectively. We are assuming INX contribution INR 0.14/0.28bn and StAR MF revenue of INR 0.68/0.95bn in FY22/23E. Core PAT for FY22/23E is at INR 0.29/0.64bn.

Source : Equity Bulls

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