Buy Multi Commodity Exchange; target of Rs 962: HDFC Securities

HDFC Securities is bullish on Multi Commodity Exchange has recommended buy rating on the stock with a target price of Rs 962 in its research report dated July 18, 2019.

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July 19, 2019 / 14:40 IST

26 Aug, 2025 12:21

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HDFC Securities' research report on Multi Commodity Exchange

Revenue was up 0.4/9.0% QoQ/YoY to Rs 0.80bn (in-line with est. of Rs 0.79bn), led by 0.2/9.3% QoQ/YoY increase in volume. Realisations declined 0.5/1.8% QoQ/YoY. Volume recovery was strong in FY19 (+22.5%). We expect growth to continue fueled by regulatory tailwinds and increasing retail participation. MCX’s market share remained stable at 91%. It’s difficult to shift volume from existing exchange only based on pricing, depth and impact cost is an important factor for participants. ADTV was up 1.8/12.8% QoQ/YoY to Rs 274.73bn. Recovery in Bullion/Energy is driving growth (+10.9/10.7% QoQ) offset by 16.2% QoQ decline in Metals (impacted by physical delivery). Bullion volume is still ~25% down from pre demonitisation level. EBITDA margin was better than expected at 34.9%, +305bps QoQ led by lower royalties to LME, cost control and absence of one-offs. Margin expansion of ~760bps over the past two quarters is encouraging. Progress on institutional participation and Indices is slow but the opportunity is big. Options volume is now 2.3% of futures volume and the MCX will start charging for options trading only from FY21.

Outlook

We maintain BUY on MCX based on in-line 1QFY20. The company has maintained market share despite increasing competition. Embedded non-linearity and cost control is leading to margin expansion. Regulatory tailwinds will boost volumes further. We assign 30x to core FY21E PAT and add net cash to arrive at SoTP of Rs 962 (13% upside).

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