Hold MCX; target of Rs 908: Edelweiss

Edelweiss' research report on MCX

MCX reported Q1FY19 PAT of mere INR62mn, much lower than our estimate, largely impacted by: a) exceptional item of INR238mn (change in valuation method of bond portfolio) and lower other income (largely treasury income). While ADTV momentum sustained (up 30% YoY), transactional revenue was softer as average realisation declined, a trend we expect to sustain. Moreover, option roll out has been gradual and institutional participation is awaited. Advent of universal exchange norms challenges MCX’s monopoly, posing risk to the premium multiple it commands. While taking away liquidity from MCX will not be easy for new players, predatory pricing could limit its pricing power.

Outlook

Despite the associated risks, the stock trades at 22x FY20E EPS, in turn capping the upside. Hence, we maintain ‘HOLD’ with target price of INR908.