BSE share price jumps over 5%, extends rally to third day as analysts remain bullish; should you buy?

BSE share price jumped over 5% on Wednesday, extending its rally to the third consecutive session after analysts remained bullish on the stock and predicted more upside. BSE shares spiked as much as 5.14% to ₹5,729.00 apiece on the NSE.

BSE stock price has rallied 20% in three months and has delivered multibagger returns of more than 150% in one year. The stock has jumped a staggering 720% in three years.

Analysts believe that Asia’s oldest stock exchange, BSE, is highly adaptive and shall thrive despite tighter index derivatives regulation. While the discontinued weekly contracts make up 21.3% of its index option premium volumes (ADPTV), there is immense scope to grow the customer base, they believe.

The Bombay Stock Exchange, or BSE, has captured over 29% of the notional options turnover, aided by product innovation, an increase in member participation, and lesser impact of regulatory changes compared to its rival NSE.

While the restriction on weekly expiry contracts per exchange w.e.f. November 2024 has impacted industry volumes, BSE has witnessed improvement in premium ADTO at 9% absolute growth in December 2024, premium turnover market share at 15%, and the premium-to-notional turnover ratio at 10 bps last month versus an average of 7.3 bps in the previous three months, analysts said.

Jefferies Upgrades

Foreign brokerage Jefferies upgraded BSE shares to ‘Hold’ and raised the target price to ₹5,250 apiece from ₹3,500 earlier.

In its base case, Jefferies estimates a revenue CAGR of 19% over FY25-27E and an operating EBITDA CAGR of 25%, with margins improving by 6 pp to 58%. It expects a PAT CAGR of 23% for BSE and has a target price of ₹5,250 based on 35x FY27E P/E.

In its upside scenario, the brokerage firm expects a revenue CAGR of 25% over FY25-27E, operating EBITDA CAGR of 30%, with margins improving by ~8 pp to 60%, and a PAT CAGR of 30%, with a target of ₹6,500 based on 40x FY27E P/E.

Nuvama Initiates Coverage

Nuvama Institutional Equities initiated coverage on BSE stock with a ‘Buy’ rating and a target price of ₹6,730 per share based on a target PE of 50x FY27E EPS plus the value of its stake in CDSL, implying an upside of 23.5% from Tuesday’s closing price.

“We believe a 50x PE for the company is apt given the duopolistic nature of the industry, and relative valuation of Indian capital market infrastructure plays such as CDSL, KFin Technologies, MCX and CAMS,” Nuvama said.

It estimates BSE’s equity index option ADPTV market share shall burgeon to 14.9% in FY27E from 3.1% in FY24 (already 11.9% in Nov-24). BSE has hiked transaction charges from ₹500 per ₹10 million to ₹3,250. Growing volumes along with higher transaction charges are likely to fire FY24–27E transaction charges CAGR of 69.9%, Nuvama said.

Moreover, Nuvama expects higher contract sizes to result in lower clearing charges, contributing to EBITDA margin expansion over FY24–27E.

“Transaction revenue is likely to increase at a blistering CAGR of 69.9% over FY24– 27E to ₹22 billion, contributing 58% to total revenue. We anticipate BSE to sustain strong revenue growth despite near-term regulatory changes, with an estimated operating revenue CAGR of 39.9% over FY24–27E. Alongside, we forecast EBITDA margin shall improve by 2,879 bps from FY24 to 57.6% by FY27E, driving an EBITDA CAGR of 76.3% over FY24–27E. APAT margin is likely to jump 2,055 bps over FY24 to 45.6% by FY27E. We forecast RoE would expand to 37.9% by FY27 from the current 11.6%,” Nuvama added.

Motilal Oswal’s Top Pick for 2025

BSE shares are also among Motilal Oswal’s top picks for 2025. The brokerage has pegged the BSE share price target at ₹6,500 apiece while recommending a ‘Buy’ call on the stock.

“We expect the premium-to-notional turnover ratio to improve to 12bps / 13bps in FY26 / FY27, boosting BSE’s revenue. Lower regulatory and clearing costs will be profitability drivers. Additionally, stable momentum in Star MF platform and the scale-up of co-location services will help BSE sustain growth,” MOFSL said.

It expects BSE to register a CAGR of 44%/ 74%/ 74% of revenue/ EBITDA/ PAT during FY24-27E, as it believes the improvement in the premium-to-notional turnover ratio will offset the volume decline.

At 10:10 AM, BSE shares were trading 4.61% higher at ₹5,700.00 apiece on the NSE.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.