ICICI Direct is bullish on Multi Commodity Exchange has recommended buy rating on the stock with a target price of Rs 1800 in its research report dated July 27, 2020.
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.
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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