Buy Multi Commodity Exchange; target of Rs 1800: ICICI Direct

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ICICI Direct's research report on Multi Commodity Exchange

MCX reported healthy Q1FY21 earnings wherein healthy other income and lower opex offset a blip in revenue led by decline in average daily turnover (ADTO). Reduction in trading hours amid Covid in April 2020, impacted ADTO by 16% YoY to Rs 23,129 crore in Q1FY21 vs. Rs 27473 crore in Q1FY20 and Rs 36,626 crore in Q4FY20. Consequently, revenues fell 8.1% YoY to Rs 73 crore. MCX reported a sharp increase in its market share by ~511 bps YoY, ~270 bps QoQ to 96.71%. Robust other income at Rs 49.7 crore and lower opex supported EBITDA, reported at Rs 26.5 crore with EBITDA margin (excluding other income) up ~150 bps YoY to 36.3%. However, higher tax rate limited traction in PAT at Rs 56.4 crore, up 29.2% YoY. The PAT margin was at 77.3% in June 2020 vs. 55% in June 2019.

Outlook

Currently, MCX trades at ~33x FY22E EPS. Given leadership in commodity space, strong efficiency, we remain positive on the stock. Hence, we revise target price to Rs 1800/share, valuing the stock at 44.1x FY22E core earnings and adding net cash after deducting SGF. Maintain BUY.

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