Buy MCX; target of Rs 1020: Motilal Oswal

Motilal Oswal's research report on MCX

MCX’s 4QFY18 revenues grew 15.8% QoQ to INR706m v/s estimate of INR694m. EBITDA margin expanded ~12pp QoQ to 34.1%, compared to our estimate of INR34.8%. PAT grew 81% QoQ to INR340, in line with our estimate of 343m. The smart growth in sequential financial performance was a function of 17% QoQ growth in volumes to INR15t.

Outlook

SEBI’s recent announcements have been in sync with the overall agenda of attracting hedgers on the commodity derivatives platform, which will drive higher volumes. We expect FY19 volumes to exit at INR300b+/day from FY17 levels of INR235b, driving earnings CAGR of 26% over FY18-20. Current regulations prevent the entry of competition in Options for at least another year, and any change to that is a risk. Our price target is INR1,020, discounts forward earnings by 30x. Buy.