MCX Ltd (Q2 FY13)

India Infoline News Service | Mumbai |

MCX Ltd (Q2 FY13)

CMP Rs1,416, Target Rs1,510, Upside 6.6%

  • MCX registered a 17.8% correction in Q2 FY13 turnover to Rs 39.3tn. This was owing to high base effect (Q2 FY13 turnover grew 110% yoy) and low commodity price volatility during the quarter. Among the major commodities, turnover for gold and silver de-grew the most by 42% and 40.4% respectively. On the other hand crude oil turnover grew well at 37.8% yoy followed by copper (+18.8% yoy).

  • The Average daily turnover (ADT) on MCX was Rs494.8bn in H1 FY13 versus Rs528.5bn in the corresponding period last year. Despite this, MCX further increased its market share (in terms of trading turnover) in the Indian commodity derivatives industry to 86.4% versus 86% in FY12.

  • On the back of the correction in turnover, operating revenues came in largely in-line with expectation at Rs1.36bn (down 15.4% yoy). Realisations were flat yoy in the range of Rs1.6-1.62 /INR lakh of turnover.

  • The Q2 FY13 OPM for MCX came in at 63.9% better than our expectation of 62%. Both technology costs and operating expenses came in lower than expected with their proportion as a % of revenues coming down sequentially. Better than expected OPM and  Lower ETR (25% versus 30.2% in Q1 FY13 and 26.8% in Q2 FY12) resulted in higher than expected PAT of Rs814mn.

  • Other key developments – (i) The technology cost arrangement with parent FTIL was largely unchanged post the renegotiation with only inflation linked increase in the fixed fee component and unchanged variable fee component.   (ii) Company declared an interim dividend of Rs12 per share comparable to Rs24 for FY12. (iii)During the quarter, MCX added two new contracts for futures trading – (a) Silver 1000 – Innovative deliverable 1kg silver contract. (b) Kapasia Khalli (cotton seed oil cake) contract with a trading unit 10MT.

  • Q2 FY13 result was largely in line with estimate in terms of revenue performance and ahead of expectation on the OPM front. We continue to remain positive on MCX’s strong growth story considering its market leadership, strong technological back bone, product innovation and most importantly the robust potential for growth for Indian commodity derivatives market. Recent cabinet approval of the FCRA bill (Awaiting passage in winter session of the parliament) comes as an added positive for the industry as a whole. Nonetheless, the decent run-up post our report on September 26, 2012 restricts material upsides. We maintain our 9-month TP of Rs1,510 and assign MP.  

Result table
(Rs mn) Q2 FY13 Q1 FY13 % qoq Q2 FY12 % yoy
Net sales 1,364 1,230 10.9 1,613 (15.4)
Operating profit 871 756 15.3 1,122 (22.4)
OPM (%) 63.9 61.5 240 bps 69.6 (571) bps
Depreciation (71) (67) 5.6 (71) (0.1)
Other income 284 233 - 170 -
PBT 1,084 922 17.6 1,221 (11.2)
Tax (270) (278) (2.9) (327) (17.4)
Effective tax rate (%) (24.9) (30.2) - (26.8) -
Adjusted PAT 814 644 26.5 894 (9.0)
Adj. PAT margin (%) 49.4 44 541 bps 50.2 (75) bps
Reported PAT 814 644 26.5 894 (9.0)
EPS (Rs) 16.0 12.6 26.5 17.5 (9.0)
Source: Company, India Infoline Research

Financial Summary
Y/e 31 Mar (Rs m) FY11 FY12 FY13E FY14E
Revenues (Rs m) 3,689 5,262 5,791 6,833
yoy growth (%) 28.4 42.6 10.1 18.0
Operating profit 1,918 3,347 3,717 4,503
OPM (%) 52.0 63.6 64.2 65.9
Pre-exceptional PAT (Rs mn) 1,734 3,009 3,271 3,833
Reported PAT (Rs m) 1,734 2,867 3,271 3,833
yoy growth (%) (21.5) 65.4 14.1 17.2
         
EPS (Rs) 34.0 56.2 64.1 75.2
P/E (x) 41.6 25.2 22.1 18.8
Price/Book (x) 8.5 7.2 6.2 5.2
EV/EBITDA (x) 35.9 20.6 18.5 14.7
RoE (%) 22.5 32.6 30.2 30.1
RoCE(%) 31.4 43.9 41.3 41.3
Source: Company, India Infoline Research
BSE 976.25 [2.70] ([0.28]%)
NSE 978.15 [0.45] ([0.05]%)

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