MOSL: MCX (Buy)-Volume-led growth- A broader set of Options now in action
MCX: Volume-led growth; A broader set of Options now in action
(MCX IN,Mkt Cap USD0.6b, CMP INR798, TP INR1000, 25% Upside, Buy)
- Marginal operational miss: MCX's 1QFY19 revenue grew 3.2% QoQ to INR729m v/s our estimate of INR775m - a 6% miss led by (i) rebates in the Liquidity Enhancement Scheme accounted in revenues and (ii) lower blended transaction yield. Consequently, the miss flowed through to profitability and EBIT margin contracted by 140bp QoQ to 27.6% (estimate of 400bp expansion). Adjusted PAT of INR279m declined by 18% QoQ because of lower other income.
- Volumes holding up for now: ADT continued moving upward to INR249b in 1QFY19 (+4% QoQ and 33% YoY). Options are now launched in five commodities and on average have constituted 3-4% of total volume. MCX is focused on boosting volumes in Options and has also introduced a Liquidity Enhancement Scheme, spending INR7.2m in the quarter. It intends to start monetizing Options once a premium of INR1b is achieved, which translates into traded value of INR100b (INR355b in 1QFY19).
- PAT severely impacted: During the quarter, reported PAT was at INR61.7m (-82% QoQ), impacted by (i) 60% reduction in other income because of MTM losses resulting out of a rise in bond yields and (ii) one-time loss of INR238m because of a change in approach for valuing its portfolio of tax-free bonds. Adjusted for the one-off, PAT was down 18% QoQ because of lower other income. These factors (and not operational reasons) are the primary reason behind our earnings revision of 30/12% for FY19/20.
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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