Buy MCX; target of Rs 2000: Motilal Oswal

Motilal Oswal's research report on MCX

2QFY21 saw sharp increase in bullion volumes, largely driven by 174% YoY increase in volumes of silver contracts. The current quarter has seen a sharp dip in crude volumes (-80% YoY), led by increased margins on SEBI's directive. However, the expected positive decision by SEBI in Nov'20 should stabilize crude volumes. We remain confident on higher intuitional participation and MCX's ability to add new clients through various organic means. We have positive stand on increasing volumes of underlying commodities and strong execution from MCX. We downgrade our EPS estimate for FY21 by 2.2% on account of higher expected ETR for the rest of the year. We continue to like MCX for its near-monopoly in the Commodity Exchanges' segment in India. Reiterate Buy.

Outlook

We continue to like the company for its near-monopoly in the Commodity Exchanges' (97% market share) segment in India. We value the company at 10-year average multiple of 32x one-year forward EPS. Our TP of INR2,000 implies 18% upside. Reiterate Buy.

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