MOSL: MCX (Buy)-Only a few inches away from the launch of Options, focused on participation enhancement and not revenue
​MCX: Only a few inches away from the launch of Options, focused on participation enhancement and not revenue
(MCX IN, Mkt Cap USD0.9b, CMP INR1133, TP INR1300, 15% Upside, Buy)
- Yield-led operational miss: MCX's 2QFY18 revenue stood at INR673m (below our est. of INR706m). Yield for the quarter seems to have declined ~3%, driving the revenue miss. Operating expenses were INR466m, in line with our estimate of INR468m, and stable sequentially. Thus, EBITDA stood at INR207m (30.7% margin, -7.9pp YoY), below our estimate of INR238m (33.7% margin, -4.9pp YoY). PAT of INR292m (below est. of INR363m) was dragged further lower by other income of INR243m (17% below est.).
- Volumes finally seeing uptick: Volumes were down 14.0% YoY in 2QFY18. Volumes have been subdued for the last three quarters, dragged mainly by bullion - Gold (-39% YoY) and Silver (-34% YoY) - due to demonetization and then GST-related uncertainty. Contribution from Gold and Silver combined was 29% of overall volumes (39% in 2QFY17). However, QoQ growth of 17.0% is encouraging, signifying an end to downward pressure on volumes.
- Zero pricing on Options leads to downward revision: MCX announced that it will launch 1kg Gold Options on 17 October 2017, with approvals for other Options expected to be in place by year-end. While we estimate volume uptick because of Options starting 3Q, MCX would refrain from levying charges till a deeper level of participation is achieved. The absence of revenue from Options, along with the miss in 2Q, has led to a cut of 11/3% in FY18/19E. We continue to be encouraged by the pace of reforms, though.
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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