BSE Shares Surge with Multibagger Returns in 2023

BSE Shares Surge with Multibagger Returns in 2023

BSE Shares Surge with Multibagger Returns in 2023

BSE Limited, the stock exchange company, has seen a remarkable surge in its share price, jumping over 360% so far in 2023. On Monday, the stock hit a new 52-week high of ₹2,595.00, marking its seventh consecutive day of gains.

Robust Earnings Forecast and Upside Potential

Despite this impressive rally, brokerage firm Sharekhan sees over 25% upside potential for BSE shares. This optimism is based on the expectation of robust earnings driven by increasing volumes in equity derivatives. BSE has experienced significant growth in equity derivatives volumes, though these are primarily concentrated on expiry day trading.

Tariff Increases and Market Share Gains

To capitalize on the growing volumes, BSE has raised tariffs on the Sensex 30 running weekly expiry contract. The exchange is also rapidly gaining market share in the derivatives segment, with its market share based on premium turnover reaching approximately 4.5% in November. This growth is even more pronounced on expiry days.

Improvement in Operational Efficiency and Margins

Sharekhan anticipates that BSE’s core EBITDA margins will significantly improve from FY25E onwards as the derivative segment starts contributing more substantially to the top line. The exchange has already incurred most of its fixed costs, and the variable costs remain minimal, indicating that operating leverage will come into play. The reduction in clearing charges due to higher volumes is a key factor in this improved efficiency.

Future Tariff Increases and Revenue Growth

Effective November 1, 2023, BSE has increased tariffs on equity options, and it plans to gradually increase tariffs on Bankex and Sensex contracts beyond the current week as volumes stabilize. This strategy is expected to boost transaction revenues, especially with higher premiums from long-dated contracts.

Sharekhan’s Positive Outlook and Target Price

Considering the potential increase in equity derivative volumes and operating leverage benefits, Sharekhan maintains a positive outlook on BSE stock. The brokerage has raised its earnings estimates and set a target price of ₹3,130 per share, implying an additional upside of over 25% from the last closing price. As of 12:45 pm, BSE’s share price was trading slightly higher at ₹2,505.95 on the BSE.

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