3 August 2020
1QFY21 Results Update | Sector: Others
BSE
Estimate change
TP change
Rating change
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CMP: INR511
Stable commentary!
TP: INR640 (+25%)
Buy
Decision to unlock value in Star MF is encouraging
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
BSE IN
47
23 / 0.3
590 / 275
6/5/7
83
BSE’s 1QFY21 reported revenue was below estimates, while the margin was
largely in-line. Management’s decision to explore options to unlock value
from its Star MF segment is encouraging. Cross-subsidization by NSE has
limited monetization opportunities for BSE in the Star MF, 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 present meaningful opportunity over the long term.
We adjust our revenue and margin trajectory to reflect the revised outlook
for the Listing Fees sub-segment. Our EPS estimate over FY21–22 remains
largely unchanged. Reiterate
Buy.
BSE reported revenue/EBITDA/PAT growth of -6%/-158%/-21% YoY.
1QFY20 revenue of ~INR1.0b was below our estimate, weighed by lower
listing fees and transaction charges. Listing fees were impacted due to
COVID-19 (lower listings) and BSE suspending over 1000 default companies
in 4QFY20 (which were billed and later provisioned for).
Despite a 39% YoY increase in average daily turnover, transaction charges
were lower in 1QFY21. 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 1QFY20.
While total expenditure of INR1.0b was lower than estimated, overall
decline in revenues resulted in largely in-line EBITDA (v/s estimates).
Higher-than-expected investment income, partially offset by higher-than-
expected tax rate, resulted in a PAT beat.
The average daily number of orders processed on the Star MF platform
increased sharply by 54% YoY.
Average daily turnover in the Commodity segment witnessed a healthy
increase.
The board approved the management’s request to explore options to unlock
value in the Star MF Platform.
Post regulation changes, BSE suspended over 1000 default companies last
quarter, which were billed, but were bad accounts and had to be
provisioned for. These companies are now not required to be billed.
NSE’s competitive pricing has impacted BSE’s ability to charge in the Star
MF, INX, and Commodity Derivatives segments. BSE would approach the
regulator to intervene on anti-competitive practices; until then, BSE would
continue with its liquidity enhancement schemes and no/low charges (Star
MF).
Margins largely in-line
Financials & Valuations (INR b)
Y/E Mar
2020 2021E 2022E
Sales
4.5
4.2
4.6
EBIT Margin (%)
-12.1 -13.7 -11.8
PAT
1.4
1.3
1.3
EPS (INR)
24.9
24.7
28.7
EPS Gr. (%)
-32.5
-0.8
16.2
BV/Sh. (INR)
493.9 530.0 534.6
Ratios
RoE (%)
5.0
4.7
5.4
RoCE (%)
7.9
8.3
8.5
Valuations
P/E (x)
20.5
20.7
17.8
P/BV (x)
1.0
1.0
1.0
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Mar-20 Dec-19 Mar-19
0.0
0.0
0.0
10.5
11.3
14.0
42.5
43.9
43.0
47.0
44.9
43.0
Key highlights from management commentary
FII Includes depository receipts
Sudheer Guntupalli – Research analyst
(Sudheer.Guntupalli@MotilalOswal.com)
Research analyst: Mohit Sharma
(Mohit.Sharma@MotilalOswal.com) /
Heenal Gada
(Heenal.Gada@MotilalOswal.com)
11 February 2020
Investors are advised to refer through important disclosures made at the last page of the
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
1
Research Report.