Exchanges, Staffing and the Internet – Overview of Results Q2FY22E – Mixed Bag; visibility improvement – HDFC Securities


Trade: MCX ADTV was down 8% in QoQ to INR 255bn at T2FY22 due to a 22/18% volume drop in bullion / metals, offset by a 22% QoQ increase in energy volume. While the volume of index derivatives remained modest, the volume of options increased sharply (~ 3x) during the quarter. Revenues are expected to decrease by 4% QoQ and the margin will contract from 137bps QoQ to 40.7%. With the higher impact of the initial margin now complete (the fourth phase implemented on September 21), the volume of options creating an additional revenue stream as of October 21, the volume of energy returning to levels standards and the change of IT vendor resulting in cost savings, we expect the stock appreciation, supported by revenue growth and margin expansion. Upgrade to BUY with 35x P / E through base PAT on December 23.

Volumes of NSE and BSE were weak in July-21, but gradually recovered in August and September-21. BSE cash / derivatives markets for T2FY22 were 8.0 / 4.1%, + 80 / -238bp in QoT. StAR MF continued to experience strong growth, while INX was down 4% quarter on quarter. ESB is expected to post revenue growth of 2.3% in QoT and an EBITDA margin of 32% (-32 bps QoQ). We are maintaining our base target multiple at 20x, which is still around a 50% discount from our peers. Our target price of INR 1,580 is based on 20x the base PAT of December 23 + net cash + CDSL participation. Maintain BUY.

CDSL continues to be the biggest beneficiary of the increase in the number of discount brokers; BO accounts market share stood at 66% as of September 21 (+ 10.1% year-on-year) with a total BO accounts reaching ~ 46mn. CDSL is expected to post another strong quarter (+ 5.9% qoq), driven by income from transactions and IPOs / shares. Transaction income will be supported by higher year-over-year trading volume and IPO / equity income income will benefit from the exploitation of the public market by private companies. Online data charges (MF e-KYC) are expected to increase by 5.0% QoQ. Margins will increase in the quarter (+164 basis points to 64.5%), offset by higher technology investments. We are maintaining our multiple of 45x, based on continued revenue momentum and market share gains. Maintain BUY.

Staffing: Teamlease is expected to post a strong quarter, thanks to the increase in the number of associated employees. The increase in economic activities and the demand for digital talent are expected to keep hiring activity robust and thus benefit general and specialist recruiting activity. Revenue is expected to grow 6.4% quarter on quarter and EBITDA margin will increase 10 basis points quarter on quarter to 2.2%, driven by higher margins in the staffing business, higher productivity and improved sales mix. A sustained recovery will lead to around 25/42% of CAGR of income / PSE in fiscal years 21-24E. Maintain BUY.

Internet: IndiaMart is expected to have a good quarter due to the economic recovery, improving business climate and easing mobility restrictions. We expect a healthy addition of around 8,000 paid providers, most of which in the monthly plan and some of the lost providers are expected to return to the platform. We expect QoQ revenue to grow 3.4% and QoQ margin to drop from 159bps to 47.2% due to increased outsourced selling costs. We expect CAGR income / EPS of + 20/14% over the years 21-24E. Maintain BUY with a DCF-based target price of INR 9,650, which implies 54x EBITDA FY24E.

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