MOSL: MCX (Buy)-Multiple dimensions for growth-Less to worry about unification of licenses
MCX: Multiple dimensions for growth; Less to worry about unification of licenses
(MCX IN, Mkt Cap USD0.7b, CMP INR741, TP INR1100, 48% Upside, Buy)
We met MCX’s management to discuss the current situation on volumes, developments around regulations, and the company’s roadmap to capitalize on the multiple emerging opportunities. Key takeaways from the meeting.
Everything shining other than Bullion: Overall volumes for MCX have been soft because of multiple issues (demonetization, GST, PMLA) reducing Bullion volume to nearly a half in a span of a year. Over 9MFY18, while volume in Bullion declined by 30% YoY, that in Base Metals increased by 17%, thereby stemming the overall volume decline to 8%. The contribution of Bullion to overall volume has now come down to 23% (from 30% last year), whereas that of Base Metals has moved to 43% (from 34%).
Encouraging pick-up in CY18 so far: Now that specific issues are behind and regulatory drive has only picked up over the last year, volumes should start seeing growth on a normalized base. To a large extent, this has panned out in the first 1.5 months of 2018 – where ADT has been INR235b v/s INR203b in 9MFY18 (and INR210b in 9MFY17).
Regulatory action striding well: Over the past year, several regulatory steps have supported a case for volumes uptick.
(i) Products: The SEBI allowed trading of Options, with Gold being launched and the full suite expected to be running by 2HFY19. MCX expects Options to add 15% to its revenue pool once it starts monetizing the product. To boost volumes, it is already seeking permission from the SEBI for a liquidity enhancement scheme.
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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