Neutral MCX; target of Rs 1480: Motilal Oswal

Motilal Oswal's research report on MCX

MCX’s total volumes jumped 79% YoY to INR41t in 1QFY24. Total revenue grew 34% YoY to INR1.45b (in line with our expectations). Futures volumes declined 17% YoY (+2% QoQ) to INR13.3t, while options volumes surged 207% YoY (+33% QoQ) to INR38.4t during the quarter. Staff costs at INR253m increased 11% YoY. Software expenses surged 362% YoY to INR888m (in line), due to higher payout for extending the contract with 63moons. The contract has been extended for six months from 1st Jul’23 at a consideration of INR1.25b (plus applicable taxes) per quarter. Total EBIT stood at INR64m vs. our estimate of INR59m as depreciation was below our estimate. EBIT margin was at 4% vs. 40% in 1QFY23/-2.8% in 4QFY23.

Outlook

We raise our FY24E/FY25E EPS by 8%/4% to factor in higher volumes in options, higher other income and lower depreciation. The transition to TCS software will be keenly monitored over the next couple of quarters. We reiterate our Neutral rating with a one-year TP of INR1,480 (premised on 24x FY25E EPS).