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Multi Commodity Exchange of India Ltd>
  • CMP : 1,276.7 Chg : 41.30 (3.34%)
  • Target : 1,600.0
  • Target Period : 12-18 Month

18 May 2022

One-off hit profitability, healthy traction in options

About The Stock

MCX is the leader in commodity derivatives exchanges in India with ~94% market share in terms of commodity futures turnover.

  • It has ~100% market share in precious metals & base metals and energy
  • Presence in various commodities offers healthy diversification

Significant increase in options turnover offset decline in futures

  • Average daily futures turnover (ADTO) declined ~17% YoY to ₹ 26369 crore, due to decline in bullion volume
  • Option ADTO continued to gain traction to ₹ 15065 crore; up 75% QoQ
  • Operational revenue up 19% QoQ; other income was flat QoQ
  • Earnings at ₹ 36.5 crore; up 6% QoQ due to one off impact of ₹ 20.3 crore
What should Investors do?

MCX’ share price has grown by ~44% over the past three years (from ~₹ 827 in May 2019 to ~₹ 1212 levels in May 2022).

  • Being a market leader in commodities exchange and a beneficiary of increase in option volume, we maintain our BUY rating on the stock.
Target Price Valuation

Factoring in time lines for launch of spot exchanges, we lower our multiple to value MCX at ~33x core FY24E EPS and net cash; thus lower our target price from ₹ 2000 to ₹ 1600.

Key Triggers for future price performance
  • Diversified product mix aids top-line amid volatility in prices
  • Decline in future turnover being replaced by string traction in options. Non-linear growth in option volume to aid business & earnings growth
  • New product launch - electricity contracts, higher commodity based delivery to act as growth catalyst
  • Continued addition of participants to aid volume growth
New Stock Ideas

Apart from MCX, in our coverage we also like 5Paisa.

  • It is a leading discount broker and offers a play on new age fintech financial intermediary with robust client addition
  • BUY with a target price of ₹ 450

Key Financial Summary

(| crore) FY19 FY20 FY21 FY22 3 year CAGR
FY23E FY24E 2 year CAGR
Net Sales             300.0              374.2              390.6              366.8 6.9%              415.0              465.9 12.7%
EBITDA              94.9              154.7              185.1              162.2 19.6%              194.5              236.2 20.7%
Net Profit             168.4              236.6              225.3              143.7 -5.2%              191.4              235.0 27.9%
EPS (|)              33.0               46.4               44.2               28.2                 37.5               46.1  
P/E(x)              36.7               26.1               27.4               43.0                 32.3               26.3  
Annual Volume Traded (in lakh crore)              67.7               86.9               82.6               87.8                100.5              112.6  
RoE (%)              13.5               17.4               15.9               10.1                 12.9               13.7  
RoA (%)                8.1                 8.7                 9.0                 5.1                   6.4                 6.9  


Variance Table

  Q4FY22 Q4FY22E Q4FY21 YoY Q3FY22 QoQ Comments
Revenue 106.5 105.8 97.0 9.8% 89.6 18.9% Healthy growth led by options turnover
Other Income 14.6 17.4 11.5 26.9% 14.5 0.5%  
Total Income 121.0 123.2 108.5 11.6% 104.1 16.3%  
Operating Expenses 35.0 36.8 35.1 -0.2% 30.9 13.3%  
Other Expenses 18.2 19.4 17.7 3.1% 20.4 -10.6%  
Total Expenses 53.2 56.3 52.7 0.9% 51.3 3.8% Focus on efficiency kept opex in check
EBITDA 53.2 49.6 44.24 20.3% 38.3 39.1%  
EBITDA % 50.0% 46.8% 45.6% 439 bps 42.7% 727 bps  
Depreciation 2.7 6.1 6.1 -55.5% 6.7 -59.2%  
Finance Costs 0.1 0.1 0.1 20.0% 0.1 -25.0%  
Exceptional Items -20.6 0.0 -0.1 - -0.5 - One-off related to intangible asset during the quarter
PBT 44.5 60.7 49.5 -10.1% 45.5 -2.2%  
Tax 7.9 14.3 11.0 -28.0% 11.0 -27.9%  
PAT 36.5 46.5 38.4 -4.9% 34.5 6.0% One-off impacted profitability
Turnover 26,10,387 26,10,387 20,76,920 25.7% 21,55,770 21.1% Futures volume declined due to moderation in bullion

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I/We, Kajal Gandhi, CA, Vishal Narnolia, MBA and Sameer Sawant, MBA Research Analysts Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.                


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