Buy MCX; target of Rs 1500: Motilal Oswal

Motilal Oswal's research report on MCX

Overall futures ADT improved by 4% QoQ and options ADT jumped by 70%, which resulted in a 19% rise in revenue ahead of our estimate. EBIT margin stood at 47.4% as compared to 35.2%/39.3% in 3QFY22/4QFY21, led by operating leverage benefits. Volumes from futures declined by 22% YoY in 4QFY22 as only the first phase of the new margin norms were implemented in 4QFY21. While option volumes kicked off from 1Q, the company started levying transaction charges only from 3QFY22. While staff costs were higher by 3% YoY, it declined by 11% QoQ. Software support charges grew in line with revenue growth. Overall EBIT, at INR505m, was better than our forecasts.

Outlook

We like MCX for its near-monopoly in the Indian Commodity Exchange segment (92% market share). We value the stock at a multiple of 30x FY24E EPS. Our TP of INR1,500/share implies a 24% upside. We reiterate our Buy rating.

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