Target: ₹1,230
CMP: ₹967
BSE has witnessed initial success in the much larger equity derivatives segment, currently dominated by NSE, driven by the launch of a weekly index options contract (Sensex) in May 2023. Impressively, BSE market share in the equity derivatives segment reached 3.4 per cent in August (vs. zero in April).
BSE expiry day market share has reached about 11 per cent without any liquidity enhancement scheme (LES). The derivatives volume is organic and is driven by 219 members (proprietary and retail) and the active UCCs on the BSE derivatives platform have reached 0.17 million, from nearly zero in three months.
We expect BSE derivative market share to reach about 10 per cent in Q4-FY24, driven by the on-boarding of large member brokers, the launch of new weekly index contracts, hedging activity and a continued increase in active traders. The increase in derivatives volume will boost cash volumes.
The steps taken by the new management are yielding results and will boost growth and margin. We expect a revenue/EPS CAGR of about 19/25 per cent over FY23-26, led by a revival in transaction revenue. We increase our EPS estimates by 7/11 per cent for FY24/25, increase core multiple to 28x (vs 25x), and upgrade rating to Buy.