BSE Ltd. share price forecast

Star Cement: We maintain BUY on Star Cement with an unchanged TP of INR 115/share (8x its Mar-24E consolidated EBITDA). Star reported strong performance in Q1FY23, with its unitary EBITDA (INR 1267/MT up 4% YoY) topping the industry after two years. This is driven by healthy volume traction and Siliguri ramp-up, robust pricing recovery in the north-east region (NER) and low cost fuel sourcing (vs industry). The company's plans to increase its capacity by 70% to 9.7mn MT by end-FY24 has gained pace as it received environmental clearance (EC) for the clinker expansion. Robust current cash position and healthy cash flow outlook should keep balance sheet unstressed. HG Infra: HG Infra's (HG) revenue/EBITDA/APAT came in at INR 10.7/1.6/1bn, a beat of 3.9/3.6/7.2%. HG has reiterated its revenue guidance of INR 50/60bn for FY23/24 on the back of a robust OB. HG has also restated its EBITDA margin for FY23/24 to be at 15.5-16%. With order inflow (OI) of INR 49.7bn (including GST) vs. INR 90-100bn order inflow guidance for FY23, the order book (OB) stood at INR 115bn (the highest-ever) at Jun'22 end. The OB is well diversified geographically. The standalone gross/net debt increased to INR 4.5/4.4bn, as of Jun'22, vs. INR 3.1/1.6bn, as of Mar'22. HG has guided to bring the gross debt level to INR 3.5bn by Mar'23. It plans to monetise the three completed HAM projects and one HAM project is expected to be completed in H1FY23, by Mar-23. Given robust order inflows and strong execution, we maintain BUY, with an increased SOTP-based...

Orient Electric: Orient Electric (Orient) delivered a subdued revenue performance due to the company's stance on protecting its margins and delayed channel filling towards the close of peak season. Revenue declined 6% YoY (HSIE +12%) due to 11% decline in ECD segment (HSIE +8%). With Jan/Feb seeing disruption in trade, the company focused on filling channel inventory in the peak season (Q1FY23). Thereby, primary numbers for ECD are weak in Q4 despite healthy secondary/offtake (trade inventory was low while company inventory was high at the end of March). With sustaining market share, we expect ECD to bounce back strongly in Q1. This move helped the company maintain its gross margin YoY and sequentially. Lighting & switchgear segment sustained demand momentum. While we remain bullish on ECD and especially fans as a long-term play, we believe that, amongst the top peers, Orient lags on execution. We, therefore, cut our target P/E to 35x on FY24E EPS, from 38x earlier. We cut our FY23/24 EPS by -4/-5%. We downgrade our BUY rating to ADD, with a revised TP of INR 340. NCC: NCC Q4FY22 revenue/EBITDA/APAT came in at INR 31/2.7/1bn, with EBITDA and PAT missing our estimates. The higher raw material prices impacted margin by 110bps, compared to Q4FY21 when it was 11.1%. With order inflow (OI) of INR 99bn in FYn22, the order book (OB) stood at INR 393bn (incl. subs). Strong order inflows are expected in Q1FY23, with a major sewage treatment plant order in Mumbai. NCC expects revenue growth of 10-15% in FY23, with an...

Maintain BUY with a TP of INR 2,150, based on 35x Mar-24E core EPS Exchanges: MCX futures ADTV continued to decline in Q3FY22 (-6.6% QoQ to INR 238bn) due to seasonality and volume decline of 2/12/5% in bullion/energy/metals. Impact of futures decline will be offset by higher index/options volumes (+26/41% QoQ). Revenue is expected to increase 4% QoQ, aided by options revenue (charging from Q3 and realisation is 1/3rd of futures) and margin will expand 51bps QoQ to 41.1%. Continued growth in options volume, recovery in futures ADTV, regulatory tailwind, launch of new products, and cost savings (change in IT vendor) will lead to revenue growth and margin expansion.

BSE is India's leading exchange group and has played a prominent role in developing the Indian capital market. It is a corporatized and demutualized entity which provides an efficient and transparent market for trading in equity, debt instruments, equity derivatives, currency derivatives, commodity derivatives, interest rate derivatives, mutual funds and stock lending and borrowing. It also possesses a dedicated platform for trading in equities of small and medium enterprises (SMEs) that has been highly successful. They also have a dedicated MF distribution platform BSE StAR MF which is India Largest Mutual Funds...

BSE reported a strong operational revenue growth of 42% YoY in 2QFY22. The revenue beat to our estimate was led by a 15% YoY increase in equity transaction charges on account of strong volumes and market share gains. Revenue from the Star MF platform rose 22% YoY in 1HFY22. Overall volumes (number of orders) saw a 99% YoY increase in 2QFY22. BSE continues to command strong market positioning. The management is open to monetization of the Star MF platform via sale to a strategic investor. BSE saw its market share increase in both the cash equity and derivatives...

NSE and BSE volumes were soft in July-21 but gradually recovered in Aug and Sep-21. BSE's cash/derivative markets for Q2FY22 stood at 8.0/4.1%, +80/-238bps QoQ. StAR MF continued to register strong growth, while INX declined 4% QoQ. BSE is expected to report 2.3% QoQ growth in revenue and an EBITDA margin of 32% (-32 bps QoQ). We maintain our core target multiple at 20x, which is still at a ~50% discount to peers. Our target price of INR 1,580 is based on 20x core Dec-23 PAT + net cash + CDSL stake. Maintain BUY. Exchanges: MCX ADTV declined 8% QoQ to INR 255bn in Q2FY22 due to a volume decline of 22/18% in bullion/metals, offset by 22% QoQ increase in energy volume. While the index derivative volume remained subdued, options volume rose sharply (~3x) in the quarter. Revenue is expected to decline 4% QoQ and margin will contract 137bps QoQ to 40.7%. With the higher upfront margin impact now over (the fourth phase implemented in Sep-21), options volume creating additional revenue stream effective Oct-21, energy volume rising back to normalised levels, and change in IT vendor leading to cost savings, we expect rerating in the stock, backed by revenue growth and margin expansion. Upgrade to BUY with 35x P/E to Dec 23 core PAT.

HG Infra: HG Infra (HG) reported revenue/EBITDA/APAT at INR 9.1/1.5/0.9bn, ahead of our estimates by 28/30/50%. The order book (OB) stands at INR 61bn (~2.4x FY21 revenue). Over the past few quarters, HG has delivered a strong execution outperformance, strengthened its balance sheet, started winning new orders, and showed strong recovery in NWC days. We believe HG deserves a multiple upgrade, backed by robust growth and solid financial discipline. We increase our P/E target multiple from 10x to 12x, upgrade our FY22/23 EPS by 5.8/6.3%, and roll forward our valuation to Jun-23E. We maintain BUY with an increased SOTP-based TP of INR 702/Sh. Somany Ceramics: We maintain our BUY rating on Somany Ceramics (SOMC) with an unchanged target price of INR 940/share (13x Jun'23E consolidated EBITDA). We continue to like SOMC for its strong retail distribution, improving product mix, and tightened working capital. In Q1FY22, pandemic impact pulled down SOMC's tiles volume by 41% QoQ and even bathware revenue halved. Thus, consolidated revenue/EBITDA/APAT fell 41/74/91% QoQ to INR 3,299/231/45mn respectively. In addition to the op-lev loss, soaring fuel prices also hit the margin and profits. ITD Cementation: ITD Cementation (ITD) reported in-line revenue/EBITDA at INR 8.2/0.8bn. However, APAT missed our estimates by 19% on higher-than-expected taxes and lower share of profits from associates/JVs. The order backlog (OB) is robust at INR 120bn (4.4x FY21 revenue), aided by Q1FY22 order wins of INR 16bn. While the lockdown impacted execution to an extent during the quarter, ITD has retained its earlier guidance of 15-20% topline growth for FY22....

BSE reported operational revenue growth of 24% YoY in 4QFY21. Growth was led by a 117% YoY increase in equity transaction charges; this was partially offset by revenue decline in Star MF on moderation in realization on the platform. Overall strong market activity led to an 86%/17% YoY increase in transaction charges / services to corporates. A robust increase in margins was the function of operating leverage in the business. The management's decision to explore options to unlock value from its Star MF segment is encouraging; however, no bids have been accepted thus far....

BSE: We maintain BUY on BSE based on better-than-expected revenue and operational performance. Revenue growth of 21.5/15.2% QoQ/YoY was led by improvement in core revenue (cash transaction +51.8% QoQ) and higher listing fee (+20.7% QoQ). EBITDA margin improved to 17.8% vs. -7.8% QoQ (highest in the past nine quarters) due to the rise in revenue and a decline in fixed cost (-7.2% QoQ). The StAR MF platform witnessed strong growth (+67% YoY), but the fall in realisation impacted revenue in 2Q, which should normalise from 3Q onwards. BSE cash market share declined to 5.9% (-80bps YoY) despite the jump in volumes. It is trying to build the derivative volume again, the market share of which is currently at 4%. The revival of derivatives volume on BSE, smart order routing, and interoperability are key triggers to transaction revenue (market share gain). New initiatives like insurance platform, spot exchange and INX are promising but do not provide revenue visibility in the near term. We arrive at an SoTP-based target price of Rs 680 by assigning 10x multiple to core Sep-22E PAT (Rs 125/share), Rs 160/share for the CDSL stake (25% discount) and adding net cash excluding SGF and clearing cash (Rs 395/share). BSE has net cash of Rs 17.8bn (~79% of market cap) and a dividend yield of ~5%, which limits downside. The stock is trading at a P/E of 12.0/10.3x FY21/22E EPS. ITC: ITC delivered a mixed bag result in a challenging environment. Most OOH consumption categories were impacted in 2Q, and the cigarettes category was not...

BSE's 2QFY21 reported revenue was above estimates, largely led higher revenue from services to corporates. Management's decision to explore options to unlock value from its Star MF segment is encouraging. Strong transactional income from the Equity segment was offset by lower revenue in Star MF on one-time rate negotiation. Cross-subsidization by NSE has limited monetization opportunities for BSE in the INX and Commodity Derivatives segments in the near term. While the announced additional income streams may be small currently, some of them have the potential to...

Cross-subsidization by NSE has limited monetization opportunities for BSE in the Star MF, INX, and Commodity Derivatives segments in the near term. This was primarily due to a decrease in turnover by 26% YoY in the Equity Cash segment (special rate group) in 1QFY21 and one- While total expenditure of INR1.0b was lower than estimated, overall decline in revenues resulted in largely in-line EBITDA (v/s estimates). NSEs competitive pricing has impacted BSEs ability to charge in the Star MF, INX, and Commodity Derivatives segments. NSEs competitive pricing has impacted BSEs ability to charge in the Star MF, INX, and Commodity Derivatives segments. This was primarily due to a decrease in turnover by 26% YoY in the Equity Cash segment (special rate group) in 1QFY21 and one-off income in While total expenditure of INR1.0b was lower than estimated, overall decline in revenues resulted in largely in-line EBITDA (v/s estimates).

BSE cash market share has slipped to 6.4% vs ~13/9% in FY18/19 and currency derivative segment is also facing tough competition. Investments in INX and newer initiatives (commodity & Insurance distribution) have impacted EBITDA margins (1.1% in 9MFY20, down ~7% YoY). We expect revenue growth of 12.0/10.4% in FY21/22E led by rebound in transaction revenue (better market condition, StAR MF and INX contribution). We expect operating leverage to play out with growth (EBITDA margin of 8.8/14.2% for FY21/22E). BSE has net cash of Rs ~20bn (~77% of MCap) and a dividend yield of ~5%, which limits downside. Risks include rise in competition, loss of market share and increase in investments. We maintain NEU on BSE based on revenue and margin miss in 3QFY20. The core revenue stream is under pressure, margin is in the negative territory due to ongoing investments in new initiatives (INX). BSE cash market share has declined to 6.4% but StAR MF platform is witnessing continued traction. We arrive at a SoTP based TP of Rs 590 by assigning 15x multiple to core Dec-21E PAT (Rs 46/sh), Rs 105/sh for the CDSL stake and adding net cash (Rs 439/sh).

BSE is witnessing continuous decline in core business metrics. Cash market share has slipped to 6.7% vs ~13/9% in FY18/19 and currency derivative is also under pressure. Continued investments in INX and newer initiatives (commodity & Insurance distribution) have impacted EBITDA margins (2.1% in 1HFY20, down ~10% YoY). We expect revenue growth of 12.8/0.3% in FY21/22E led by rebound in transaction revenue (better market condition, StAR MF and INX contribution). We expect some operating leverage to play out with growth (EBITDA margin of 12.0/16.5% for FY21/22E). BSE has net cash of Rs ~20bn (~82% of MCap) and a dividend yield of ~6%, which limits downside. Risks include a rise in competition, loss of market share and an increase in investments. We maintain NEU on BSE based on unexciting 2QFY20. The core revenue stream remains under pressure while new age platform like StAR MF is doing well. Margin expansion will come with growth. We arrive at a SoTP based TP of Rs 585 by assigning 25x to core Sep-21E PAT (Rs 122/sh), Rs 111/sh for the CDSL stake and adding net cash after 20% discount (Rs 351/sh).

26 October 2019 INR22.6b (in-line) were flat YoY. The 9% YoY growth in pharmaceuticals (64% of sales) was offset by 15% YoY decline in Life Science Ingredients (LSI) (33% of sales). Particularly, Generics segment in Pharma and Specialty Intermediates in LSI grew 20%/32% YoY to INR3b/INR2.6b. 450bp YoY (~50bp QoQ) to 66% due to superior product mix. EBITDA margin grew at lower rate of 90bp YoY to 20.7% (in-line) due to higher employee cost (+130bp YoY as % of sales) and other expense (+170bp YoY as % of sales). INR2.2b) due to lower tax outgo. For 1HFY20, sales/EBITDA/PAT came in at INR44b/INR9b/INR4.4b, up 2%/3%/8% YoY. mirror shareholding as that of JLS would be listed on the BSE/NSE. Process would take about nine months. The Pharma entity had sales/EBITDA of INR56b/INR14b and LSI had sales/EBITDA of INR36b/INR4.

BSE has been investing in future growth drivers like INX, Insurance distribution, SME and StAR MF. Out of these only StAR MF has started generating revenue while the rest would need more time. Incremental revenue from StAR MF, volume revival and higher listing fee should lead to revenue growth of 11.1/11.8% in FY20/21E. We expect some operating leverage to play out with growth (EBITDA margin of 11.4/15.8% for FY20/21E). The stock is down 23% in the last 3M due to stress in the tradition revenue stream, continued investments despite slowdown and buyback tax. Value is emerging with net cash of Rs 20bn (~80% of MCap) and a dividend yield of ~7%. Risks include a rise in competition, loss of market share and an increase in investments. We maintain BUY on BSE based on in-line revenue and better margins. Increasing revenue contribution from StAR MF platform and rise in listing fee (exclusively listed) are positives. Buyback of Rs 4.6bn will be completed and tax applicable is only Rs 0.12bn (~3%). We arrive at a SoTP of Rs 655 at 25x core FY21E PAT plus Rs 134/share for stake in CDSL plus net-cash (ex-buyback and with 20% discount).

BSE Limited (BSE) is an India-based stock exchange company. BSE provides a transparent market for trading in equity, debt instruments, derivatives and mutual funds. The Company consists of two business segments: Stock Exchange activity and Depository activity. Stock exchange activity is engaged in facilitating the trading of securities and the activities incidental thereto, and Depository activity provides depository-related services. It also has a platform for trading in equities of small and medium enterprises (SME). BSE also provides various services to capital market participants, including risk management, clearing, settlement, market data services and education. The Company's subsidiaries include Marketplace Technologies Private Limited, Central Depository Services (India) Limited (CDSL), Indian...

Maintain BUY with SoTP of Rs 758 by assigning 25x to Dec-20E core PAT (ex-CDSL), Rs 120/share for the CDSL stake plus net cash. BSE reported weak 3QFY19, with revenue down 9.1% QoQ to Rs 1.05bn. There is visible weakness in core business streams (across listing fees, cash equity and even currencies, where BSE was dominant). BSE continues to lose equity cash market share (-43 bps QoQ to 8.3%), while its grip on currency derivatives also loosened this quarter (-326bps QoQ to 44.0% share). Drop in revenues and ongoing investments in new initiatives led to steep fall in EBITDA margin, (adjusted margin stood at 1% down 796bps QoQ).

Maintain BUY with SoTP of Rs 871 at assign 25x (vs. 30x earlier) on Sep-20E core PAT (ex-CDSL), Rs 129/sh for the CDSL stake plus cash. BSE stumbled in 2QFY19, with revenue crawling up 0.3% QoQ to Rs 1.15bn. There is visible weakness in core business streams (across listing fees, cash equity and even currencies, where BSE is dominant). BSE continues to lose equity cash market share (-117 bps QoQ to 8.7%), while its grip on currency derivatives also loosened this quarter (-469bps QoQ to 47.3% share).