MOSL: MCX (Buy)-Disappointment led by one-offs and other income-but volume triggers well in place
MCX: Disappointment led by one-offs and other income; but volume triggers well in place
(MCX IN, Mkt Cap USD0.7b, CMP INR931, TP INR1100, 18% Upside, Buy)
- Yield-led PAT miss: MCX’s 3QFY18 revenue came in at INR610m, 2% below our estimate of INR621m, led by a slight decline in realization. Operating expenses stood at INR475m, exceeding our estimate of INR453m by 5% due to one-off expense (INR20m) toward events hosted by MCX in 3Q – excluding which operational results were in line. PAT of INR188m (below our estimate of INR283m) was dragged lower, as other income of INR156m missed our estimate by 39% due to MTM losses on fixed income instruments.
- Base for volumes to normalize in 4Q: The bullion-led volume decline at MCX commenced in Dec’16 – the month post demonetization. In the subsequent 12 months (Dec’16 to Nov’17), gold/silver volumes declined 47/31% YoY, leading to an overall volume decline of 17% YoY. However, with the quantum of decline reducing dramatically and the sharp uptick seen in base metal volumes (19% YoY), growth can be expected to return in the next quarter.
- Regulatory action striding well: Over the past nine months, several regulatory steps have supported a case for volumes uptick on the retail (allowing distribution by bank subsidiaries) and institutional (allowing Category-III AIFs to take commodity exposure) fronts. Approval of the proposal to allow MFs/PMS players in commodity derivatives would further boost participation. With reforms underway, we see scope for significant volumes recovery, from new products and participants.
Multi Commodity Exchange of India Limited (MCX) is a holding company. The Company is engaged in Facilitating Trading, and Clearing and Settlement of Commodity Derivatives. It operates as a commodity futures exchange. It offers its products in various segments, such as Bullion, including Gold, Gold Mini, Gold Petal and Silver; Base Metals, including, Aluminum, Copper, Lead, Nickel and Zinc; Energy, including Crude Oil, Brent Crude Oil and Natural Gas, and Agro Commodities, including Cardamom, Cotton, Crude Palm Oil, Kapas and Mentha Oil. Its MCXCOMDEX is a real-time commodity index based on commodity futures price of an exchange. Other commodity indices developed by the Company include MCXAgri, MCXEnergy and MCXMetal. Its online trading platform is accessible to its members through its trader workstation or computer-to-computer link (CTCL) using multiple connectivity media, including point of presence (POP) connectivity, very small aperture terminal (VSATs) and the Internet.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.