Multi Commodity Exchange of India Ltd. share price target

1QFY22 saw further normalization in bullion volumes, largely driven by 24%/13% sequential decline in gold/silver volumes. This was partially offset by a 49% sequential increase in crude volumes on the reversal of the higher margin requirements imposed earlier. Overall ADT dipped 9.8% QoQ, leading to 9.7% sequential decline in revenue. The impact on volumes during the quarter was the result of some normalization in bullion volumes and the third phase of the implementation of new margin rules (75% of peak margin requirement) from 1st June. June...

ADTO in commodity futures on the exchange declined 13% to | 31823 crore in Q4FY21, due to increase in regulatory requirement of upfront margin partially offset by higher gold priced compared to last year. Markets share in commodity futures space has remained strong at 96.04% in FY21. Number of unique customers increased from 51.5 lakh in Q3FY21 to 60.2 lakh in Q4FY21 while authorised person count was at 52777. Decline in ADTO (13% YoY) was partially offset by healthy realisation keeping moderation in operational revenue at ~8% YoY to | 97 crore. Tight...

4QFY21 saw further normalization in bullion volumes, largely driven by 11%/15% sequential decline in gold/silver volumes. This was partially offset by a 56% sequential increase in crude volumes on the reversal of the higher margin requirements imposed earlier. Overall ADT dipped 3% QoQ, leading to 4% sequential decline in revenue. The impact on volumes during the quarter was the result of the second phase of implementation of new margin rules (50% of peak margin requirement) from 1st March. March volumes fell 16% MoM as the number...

ADTO in commodity futures on the exchange increased by 4% to |32,181 crore in Q3FY21, however, a 15% moderation was witnessed sequentially attributable to decline in gold price and kicking in regulatory requirement of upfront margin. Option ADTO remained steady at | 860 crore in 9MFY21. Newly launched bullion index futures ADTO has been at | 270 crore, while metal index ADTO was reported at ~| 50 crore (data pertaining till 20 Jan 2021). Markets share in commodity futures space has remained strong at 96.48% in Q3FY21. Number of unique customers continued to remain...

Average daily turnover (ADTO) of commodity futures contracts jumped 10% YoY, 64.9% QoQ to | 38144 crore in Q2FY21. Total volume of contracts (in lots) as on September 2020 was at ~6.1 crore vs. ~4.2 crore in June 2020. MCX reported a sharp increase in its market share by ~418 bps YoY to 97.05%. The company had launched iComdex Bullion Index in August 2020, which registered an ADTO of | 260.8 crore as on September 2020. Topline reported growth of 19.5% YoY to | 119.7 crore, primarily on account of healthy ADTO growth. However, lower G-sec yields led to muted other...

MCX revenue for the quarter declined by 14% YoY to Rs 730 mn, largely due to reduction in exchange timings in Apr'20. However, the recovery was stronger in May-June 20. EBITDA for the quarter declined by 20% YoY to Rs 265 mn, while EBITDA margin contracted by 267bps YoY to 36.3%. Despite a fall in topline company has reported 29% profit growth, which...

Revenue growth (33% YoY) was strong despite the fizzling out of volumes over the last week of Mar20 on news of reduction in the number of trading hours. Management indicated that crude volumes remain dented as the sentiment of participants was impacted due to (a) negative price settlement issue, and (b) increase in margin requirement. As volatility reverts to manageable level, company is optimistic about the reduction in margin requirement and Company has hinted at lockdown impact on its warehouse operations. During May, while traded value across Gold (+69% YoY), Silver (+121% YoY) and Nickel (+62% YoY) recovered, Crude (-78% YoY) and base metals continued to drag the overall We upgrade our EPS estimates over FY21-22E by 3-6% as we adjust our EBITDA margin trajectory. As the volatility reverts to manageable level, the company is optimistic of reduction in margin requirement and improvement The company has hinted at lockdown impact on its warehouse operations.

Precious metals like gold and silver reported a robust increase of ~120%/133% in total value of contracts traded. Volatility in crude prices led to a surge in speculation activity translating into ~60% YoY growth in traded value During the quarter, while growth in traded value of gold and silver was more pronounced in Feb and March, it was more front ended for crude (toward Jan and Feb) due to the sharp fall in crude prices. Most of the base metals continued to show a trend of decline (YoY) due to the compulsory delivery rule, which impacted the interest levels of speculators and arbitrageurs. Base metals continue to report declines, largely led by the compulsory delivery rule, which impacted the interest levels of speculators and arbitrageurs. Despite the one-off near-term impact on 1QFY21E (0% YoY revenue growth), we expect strong ~14%/18% revenue growth over FY21/22, primarily led by precious metals and crude.

Regulatory tailwinds like Institutional participation, Indices (cash settled) and new options contracts will boost volumes and increase depth. Globally Institutions account for ~50% of the total derivatives volume. MCX's focus on improving the physical delivery mechanism and local price discovery for key commodities will provide a platform for long term sustainable growth. We estimate revenue/EBITDA/PAT CAGR of 21/45/26% over FY19-22E. The stock trades at P/E of 27.0/21.5 FY21/22E EPS, which is reasonable, considering healthy growth, tight cost control, RoIC of ~50% and huge cash (~22% of Mcap). Risks include regulatory delays, increase in competition and drop in commodity volatility. We maintain BUY on MCX based on in-line revenue and margin beat in 3QFY20. Market share (94%) is steady despite rise in competition. Embedded non-linearity and cost control is leading to margin expansion. Regulatory tailwinds, healthy growth in unique client codes (UCC), launch of Indices and increased volatility will aid volume growth. We assign 30x to core Dec-21 PAT and add net cash (20% discount) to arrive at TP of Rs 1,370.