The brokerage house has maintained its Buy rating on MCX shares with raising the target price of ₹2,070 apiece (from ₹1,900 per share earlier), following better-than-expected revenue and margin performances, led by options.
The options ADTV has witnessed strong growth of +61% QoQ in the quarter and is up ~5x YoY. There is no sign of weakness, Oct-22 options ADTV is at INR 347bn, and it is trending above the Q2 level," it highlighted.
The commodity exchange's consolidated net profit for the second quarter ended September 2022 for the current fiscal rose over 93% from the year ago quarter to ₹63 crore whereas its revenue rose to ₹127 crore in Q2. EBITDA margin stood at 51.5%, up 622 bps quarter-on-quarter (QoQ), led by non-linearity.
HDFC Securities said that it remains constructive on the options growth story, led by increasing retail participation; the launch of shorter duration gold options contracts; and index options and FPI participation, which will provide an additional push to volumes.
We expect options revenue to grow 418/44% and contribute 39/47% of revenue in FY23/24E. Futures ADTV was down 5.2% QoQ; in fact, the cannibalisation of futures volume is lower than expected, supported by Algo trading," it added.
Further, the shift to the new trading platform is scheduled for January 2023 and mock trading will begin from November 2022. The contract with the existing technology vendor ends on December 202 and the smooth tech transition is the greatest challenge/focus for MCX management, as per the brokerage. “The change in technology vendor should lead to a cost-benefit in FY24E, resulting in around 500 bps of margin expansion."
The Multi Commodity Exchange of India Limited (MCX) is a commodity derivatives exchange that facilitates online trading of commodity derivatives transactions.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
