Buy BSE; target of Rs 1034: ICICI Securities

ICICI Securities research report on BSE

Bombay Stock Exchange (BSE) has made notable changes in the rules governing derivative products including contract size and expiry day. This has led to traction in derivatives (INR 4.3trn notional ADTV in Jul’23 from almost nil in Mar’23). The establishment and acceptance of BSE derivatives is our investment thesis.

Outlook

We upgrade BSE to BUY (from ADD) with a revised target price of INR 1,034 (earlier Rs746) based on SoTP valuation as follows: (1) ~40x multiple (earlier: 25x) to FY25E core EPS of INR 18.7 (largely unchanged); our core EPS excludes ‘other income’ and share of profits in CDSL; (2) BSE’s 15% stake in CDSL valued at INR 1,210 translating into per share valuation of INR 112 post a holding company discount of 20%; and (3) free cash of INR 23.6bn (INR 175/share).