Buy Multi Commodity Exchange; target of Rs 980: HDFC Securities

HDFC Securities' research report on Multi Commodity Exchange

MCX delivered muted set of numbers in 2QFY19, revenue was down 2.4% QoQ to Rs 711mn (vs our est. of Rs 734mn), led by 0.3% QoQ drop in volume (Rs 15.8 TN) and Rs 16.7mn impact from Liquidity Enhancement Scheme (LES). ADTV was up 1.2% QoQ and 12.2% YoY to Rs 246.55 bn led by Metals (+3.5%). Trading volume has picked-up in Sep-18, ADTV is at Rs 273.78bn (+22% YoY) led by Metals and Energy. Hedging in Bullions is witnessing increased traction after the regulatory push. Option volume registered strong growth in the quarter (ADTV of Rs 12.08bn, +121.3% QoQ, ~5% of futures) led by LES. The company will start charging for options only in FY20E when it reaches ~10% of futures volume.

Outlook

We estimate revenue/PAT CAGR of 16/19% over FY18-21E. Maintain BUY with a TP of Rs 980 implying a P/E of 30x Sep-20E EPS.

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