Multi Commodity Exchange - Q1FY21 Company Update - ICICI Securities

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.

Valuation & Outlook

Increased volume driven by volatility in commodity prices, strong operational efficiency is seen driving performance. We stay positive on earnings visibility owing to 1) market leadership, 2) strong recovery in ADTO amid volatility in commodity prices, 3) launch of index-based products and 4) participation by institutional clients. We expect ~15.4% CAGR in EBITDA in FY21-22E, driven by ~8% CAGR in revenue coupled with improvement in efficiency. RoE is expected at 16.3% in FY22E, post a dip in FY21E amid Covid. 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.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_MCX_CoUpdate_Jul20.pdf

Shares of MULTI COMMODITY EXCHANGE OF INDIA LTD. was last trading in BSE at Rs.1705.3 as compared to the previous close of Rs. 1561.2. The total number of shares traded during the day was 91890 in over 6982 trades.

The stock hit an intraday high of Rs. 1730 and intraday low of 1580. The net turnover during the day was Rs. 152355455.

Source : Equity Bulls

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