Add These 2 Financial Services Stocks, Gave Multibagger Returns In 3 Years: HDFC Securities

HDFC Securities in its Q2FY23E Results Preview research report published on 14th October 2022 has rated BSC Limited and Central Depository Services (India) Limited (CDSL) "Add". Both the companies are financial services sector companies having a market capitalization of more than Rs 8000 Crore. The brokerage sees gains of up to 25% from its current level. Here are the details of the report including the potential gains:

1. BSE Limited

Bombay Stock Exchange (BSE) is the oldest stock exchange in Asia with a rich heritage, now spanning three centuries in its 133 years of existence. BSE is the first stock exchange in the country which obtained permanent recognition (in 1956) from the Government of India under the Securities Contracts (Regulation) Act 1956. BSE's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized. It has a market capitalization of Rs 8,064.11 crore.

BSE - Brokerage's comments

According to the brokerage, BSE market share in the cash/derivatives/currency segment stood at 7.9/1.7/18.6%, which is a slight improvement of +115/53/57 bps QoQ respectively. The cash turnover recovered in Q2 (Aug/Sep-22 strong) after two-quarters of decline. The exclusive/non-exclusive cash volume improved by 12/19% QoQ. The mutual fund platform (StAR MF) grew 39% YoY but the pace of growth has deteriorated. BSE is expected to report a +3.4% QoQ revenue growth and an EBITDA margin of 32.3% (+67 bps QoQ). 

"We have increased revenue/EBITDA estimates by 2.7/8.7% for FY24E due to a recovery in transaction volumes. We maintain our ADD rating with a target price of INR 740, based on 25x core June-24 PAT + net cash + CDSL stake (15% discount)," the brokerage said. 

BSE Stock Outlook- CMP, 52-week Low/high, Returns, and Potential Upside

According to the given target price, the stock has the potential to surge 25% from its current level, keeping the given target price in consideration i.e., Rs 740 per share.

The current market price (CMP) of the stock on NSE stood at Rs 595.30 per share. The stock's 52 week high is Rs 1,046.67 per share and the 52 week low is Rs 420.55 per share, respectively. 

The stock has performed well in terms of return over the past 5 years. However, it has given 3.56% negative return in the past 5 days, and 10.94% negative return in the past 1 month, respectively, Over the past 3 and 6 months, it has given 9.63% negative return and 34.04% negative return, respectively. 

The stock has given a positive return of 27.87% over the year. It gave a multibagger return of 247.32% in the past 3 years. In the past 5 years, it has given 82.72% positive return. 

2. Central Depository Services (India) Limited

Central Depository Services (India) Limited (CDSL) is one of India's leading securities depositories in India. CDSL was promoted by BSE Ltd. jointly with leading banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Standard Chartered Bank and Union Bank of India. CDSL was set up with the objective of providing convenient, dependable and secure depository services at an affordable cost to all market participants. CDSL received the certificate of commencement of business from SEBI in February 1999.  

Other online services provided by CDSL include e-voting, mobile applications, and e-Locker National Academy Depository easi (Electronic Access to Securities Information and Execution of Secured Transaction) (myeasi m-voting). It has a market capitalization of Rs 12,640.84 crore.

CDSL - Brokerage's comments

According to the brokerage, CDSL added ~1.7mn BO accounts in Sep-22 and the market share stood at 71.5% (+530bps YoY) in Sep-22. The pace of BO account growth has moderated to ~45% YoY vs >60% last year. CDSL's revenue is expected to rise moderately for the quarter (+4.3% QoQ) on the back of better transaction, IPO/corporate action, and e-voting revenue. Normalised margin (adjusted for one-time bonus) will improve by 156bps to 63.0%.

"We maintain our ADD rating due to growth moderation in FY23/24E, given a slowdown in market-linked revenue (~60%). However, the recent regulatory requirement for dematerialising insurance policies could provide a boost to revenue and profitability. The stock is trading at a P/E of 35x FY24E core PAT. We have a TP of INR 1,260, based on 35x June-24E core PAT + net cash," the brokerage has said. 

CDSL Stock Outlook- CMP, 52-week Low/high, Returns, and Potential Upside

The stock is likely to gain up to 5% from its current level considering the given target price i.e., Rs 1,260 per share. 

The current market price (CMP) of the stock stood at Rs 1,209.65 per share on NSE. The stock was listed on the exchange in June 2017. Its 52 week low level is Rs 1,015 per share and 52 week high is Rs 1,734.40 per share, respectively. 

In terms of return on investment, the stock has delivered good returns over the 5 years. However, in the past 5 days, it has fallen 4.67% and in the past 1 month 12.35%, respectively. In the past 3 and 6 months, it gave 10.22% positive return and 15.74% negative return, respectively. The Stock over the past 1 year has given 13.51% negative return. In the past 3 and 5 years, it has given 485.65% multibagger return and 221.89% multibagger return, respectively. 

 

Disclaimer

The stocks have been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.