Edelweiss's research report on MCXMulti Commodity Exchange’s (MCX) Q4FY16 PAT of INR271mn (down 45% YoY) was lower than our estimate due to: a) lower revenue momentum; b) higher opex (owing to higher advertising cost) and c) further markdown of MSEI shares (INR16mn). Average daily trading volume (ADTV) bounced back to INR236bn (We estimate ADTV CAGR of ~25% over FY16-18 and operating leverage benefits to lend ~435bps delta to margins. Extraordinary items (viz., write-down of investment in MSEI and transfer to IPF) hit FY16 PAT. We have further built in extraordinary of INR277mn in FY17 (assuming 50% write-down of MSEI warrants and shares of MSEI and MCCIL). Considering structural growth visibility in ADTV, we maintain ‘BUY/SP’ with TP of INR1,026. The stock is trading at 27.3x FY18E P/E and 3.0x FY18E P/BV. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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