Buy Multi Commodity Exchange: Motilal Oswal

Motilal Oswal is bullish on Multi Commodity Exchange (MCX) and has recommended buy rating on the stock in its February 02, 2013 research report. According to the research firm, the company is expected to post transaction fees at a CAGR of 14% over FY13-15E and EPS at a CAGR of 19% during this period.

MCX's 3QFY13 revenues at INR1.25b (-3.9% YoY, -4.9% QoQ) was in line with our estimate. EBITDA margin at 58% was marginally below our estimate of 58.9%. PAT at INR758.7m (+10% YoY but -6.8% QoQ) was higher than our estimate of INR667.7m, on the back of other income (INR372.5m, v/s our estimate of INR271.5m).

Lower revenues YoY was on the expected lines as the total value of volumes declined to INR37t in 3QFY13 by 3.6% YoY, from INR38.4t in 3QFY12. Although employee costs at 5.4% of revenues declined 50bp QoQ (110bp below our estimate), administration and other expenses increased 230bp QoQ (+110bp v/s our estimate) to 19.6% and offset the gain from the former.

Over 9MFY13, volumes stood at INR112.7t, down by 5.9% YoY. The decline is led by silver (-31.1% YoY) and gold (-14.6% YoY), offset only partially by crude oil (+28.9% YoY) and copper (+8.7% YoY). Near-monopolistic market share continued, with 9MFY13 share at 87% v/s 86% in FY12. Average daily turnover at the exchange in 3QFY13 was INR481b, down from INR510b in 2QFY13 and INR503b in FY12.

Current CFO Mr Mahesh Joshi resigned and Mr Hemant Vastani, Head-Finance & Accounts has been named the acting CFO of the company.

We expect MCX to post transaction fees at a CAGR of 14% over FY13-15E and EPS at a CAGR of 19% during this period. We separately value MCX's stake (including warrants) in MCX-SX. The standalone exchange's business is valued at 20x FY15E earnings and attribute INR110 (under revision, likely to be revised upwards) as the value to its stake in MCX-SX. Maintain Buy," says Motilal Oswal research eport.

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