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MCX India climbs 9% as Morgan Stanley sees 34% return after Q2 results

Motilal Oswal upgraded its FY20 earnings estimate for MCX by 11 percent, largely led by operative leverage.

October 16, 2019 / 11:07 AM IST
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Shares of Multi Commodity Exchange of India rallied 9 percent intraday on October 16 as brokerages remained bullish on the stock, citing strong growth in September quarter earnings.

The stock touched nearly two-year high of Rs 1,107.70, rallying around 45 percent in last one year. It was quoting at Rs 1,055.50, up Rs 38.85, or 3.82 percent, on the BSE at 1031 hours IST.

While having an overweight call on the stock, Morgan Stanley raised its target price to Rs 1,365 from Rs 1,260 per share, implying 34 percent potential upside from current levels after increasing EPS estimates by 14 percent, 6 percent and 10 percent for FY20-22.

The global brokerage house raised target on the back of higher fee realisation and lower operating costs, and expects the stock to double in three years.

MCX India reported a healthy growth of 99.7 percent year-on-year in second quarter consolidated profit at Rs 71.75 crore and 41 percent increase in revenue at Rs 100.2 crore compared to year-ago. Earnings before interest and tax increased 131 percent YoY.


Consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 106.4 percent year-on-year to Rs 47.26 crore and margin expanded 1,500 bps to 47.2 percent in Q2 YoY.

Volumes were grew by 40.2 percent YoY, mainly led by gold (up 131 percent YoY) and crude (up 88 percent YoY), but base metal volumes declined sharply due to (1) the SEBI's directive to allow trading of only one contract per commodity and (2) the switch from cash settlement to delivery based settlement.

Aluminum volumes fell 71 percent YoY, while copper, lead and zinc volumes were down 25 percent, 52 percent and 50 percent, respectively.

While maintaining buy call on MCX India with a target price at Rs 1,250, Motilal Oswal expects volume/revenue/earnings CAGR (FY19-21) of 22 percent/24 percent/28 percent.

"Over the past few months, sentiment around MCX reversed from that of competition concerns to one of optimism largely driven by growth in bullion volumes. Its monopolistic market share has remained intact and it now ruled out the possibility of a price cut, which was earlier on the anvil," the brokerage said.

Motilal Oswal upgraded its FY20 earnings estimate for MCX by 11 percent, largely led by operative leverage.

Disclaimer: The above report is compiled from information available on public platforms. advises users to check with certified experts before taking any investment decisions.
Moneycontrol News
first published: Oct 16, 2019 11:07 am

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