MOSL: MCX (Buy)-Higher operating expenses compound bullion volumes decline-Expect trading in options to commence in 2-3 months
​MCX: Higher operating expenses compound bullion volumes decline; Expect trading in options to commence in 2-3 months
(MCX IN, Mkt Cap USD0.9b, CMP INR1153, TP INR1325, 15% Upside, Buy)
- Revenue hurt by tepid volumes: 4QFY17 revenue from operations grew 3.2% YoY to INR574m (in-line). Volumes fell 16.5% YoY, led mainly by bullion (gold down by 51% and silver by 26%) in the aftermath of demonetization. Average daily turnover in 4Q was INR199b. However, average realization rose ~18% YoY after pricing hike taken by MCX (effective 1 October 2016).
- Profit miss on higher operating expenses: EBITDA of INR79m missed estimate of INR128m due to other expenses of INR225m (+41% YoY; est. of INR160m) toward regulatory fees/investments in GIFT city. Full-year other expenses were INR690m, which MCX expects to maintain next year too. PAT fell 19% YoY to INR219m (est. of INR296m) on lower operating profit.
- GST - added concern for near-term bullion volumes: After suffering in 3QFY17 post demonetization due to slow activity in the underlying physical commodity business, volumes failed to pick up in 4Q. Management cited continued tepid activity in the physical markets - this time compounded by GST-related uncertainty. That said, MCX expects volumes to recover, and options to commence in next 2-3 months. This may be followed by the entry of competition in the segment (likely by end-FY18 or beginning of next fiscal) following the grant of 'universal exchange' license.
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.
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