most- multi commodity exchange- 3qfy13 results update- 2 february 2013
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7/29/2019 MOSt- Multi Commodity Exchange- 3QFY13 Results Update- 2 February 2013
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Ashish Chopra (Ashish.Chopra@MotilalOswal.com); +91 22 3982 5424 1Investors are advised to refer through disclosures made at the end of the Research Report.
Multi Commodity ExchangeCMP: INR1,398 BuyBSE Sensex S&P CNX
19,781 5,999
Bloomberg MCX IN
Equity Shares (m) 51.0
M.Cap. ( INR b)/(USD b) 71.3/1.352-Week Range ( INR) 1,617/838
1,6,12 Rel. Perf. (%) -5/18/-
2 February 2013
3QFY13 Results Update
Financials & Valuation (INR b)
Y/E March 2013E 2014E 2015E
Sales 5.1 6.0 7.3
EBITDA 3.0 3.6 4.5
PAT 2.7 3.2 3.9
EPS (INR) 53.6 61.9 75.8EPS Gr. (%) -4.5 15.5 22.4
BV/Sh. (INR) 223.0 252.3 288.3
RoE (% 25.6 26.1 28.0
RoCE (%) 24.6 25.2 27.2
Payout (%) 54.6 52.9 52.5
Valuations
P/E (x) 26.1 22.6 18.4
P/BV (x) 6.3 5.5 4.8
EV/ EBITDA (x) 19.4 15.9 12.1
Div. Yield (%) 2.1 2.3 2.8
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.
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Multi Commodity Exchange of India
2 February 2013 2
Source: Company, MOSL
EBITDA margin during the quarter was 58%, only marginally below our estimate of
58.9%. Although employee costs at 5.4% declined 50bp QoQ and was 110bp below our
estimate, administration and other expenses increased 230bp QoQ to 19.6% (+150bp
v/s our estimates). EBITDA at INR723m declined 11.8% YoY and 11.5% QoQ (v/s our
estimate of INR733m). EBIT margin was further lower at 51.2% v/s estimate of 53.3%,
as depreciation was up 1.4pp QoQ to 6.8% of revenues (v/s estimate of 5.6%).
EBIT margin declined on lower revenues, below estimate due to higher depreciation
3QFY13: Operationally in line; PAT above estimate on higher other income
Revenues at INR1.25b declined 3.9% YoY and 4.9% QoQ and was in line with our
estimate of INR1.24b. 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.
Revenues declined both QoQ and YoY, but on expected lines as volumes on the exchange remained
soft
Source: Company, MOSL
Other income (including other operating income) was INR372.5m, v/s our estimate of
INR271.5m. Higher other income drove above-estimate PAT during the quarter. PAT at
INR758.7m (v/s estimate of INR667.7m) grew 10% YoY but declined 6.8% QoQ.
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Multi Commodity Exchange of India
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Volumes update: 9-month performance dragged by decline in silver, gold
volumes
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), but offset only partially by crude oil (+28.9%
YoY) and copper (+8.7% YoY).
Total volumes by value in 3QFY13 were INR37t, -5.38% QoQ and -3.6% YoY. Total
contracts traded during the quarter were INR101.3m, +4.2% QoQ but -9.1% YoY.
YoY decline in quarterly volumes was led by muted activity in gold and silver counters
v/s corresponding quarter last year. Total traded value of gold was down 17.4% YoY in
3QFY13 and silver was down 14.3% YoY.
Volumes in both the key commodities declined YoY -
Total traded value declined both YoY (3.6%) and QoQ (5.3%) gold (-17.4%) and silver (-14.3%)
Combined market share of gold and silver declined from 60% in 3QFY12 to 52% in 3QFY13
3QFY12 3QFY13
Operational performance: Average daily volumes down, market share
inches up
Total commodity contracts traded in 9MFY13 increased 2.8% YoY to 296.8m. Average
daily turnover at the exchange in 3QFY13 was INR481b, down from INR510b in 2QFY13
and INR503b in FY12. Near-monopolistic market share was retained, with 9MFY13
share at 87%, v/s 86% in FY12.
Source: Company, MOSL
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Multi Commodity Exchange of India
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Company description
Multi Commodity Exchange of India Ltd (MCX) is a state-
of-the-art electronic commodity futures exchange,
offering futures trading in over 47 commodities, mainly
gold, silver, copper and crude oil. It began operations in
November 2003 and has over 86% share (as on March 31,
2012) of the Indian commodity futures market. In terms
of contracts traded in CY11, it is the third largest globally,
second-largest in gold, largest in silver, second-largest
in natural gas and third-largest in crude oil.
Key investment arguments
Supply of technology platform by its parent,
Financial Technologies India (FTECH), gives MCX acompetitive edge that is difficult to replicate.
The Union Cabinet approved a proposal to move
official amendments to the FCRA Bill. This will give a
fillip to MCX's volumes, with the introduction of
options trading, new commodity classes like
intangibles and new participants like banks and MFs.
Key investment risks
Low volatility could drive lower volumes, resulting
in an even bigger hit to profits, given operatingleverage.
Delay in amendments by the regulator will impair
growth in volumes at the exchange.
Recent developments
Current CFO Mr Mahesh Joshi resigned and Mr
Hemant Vastani, Head-Finance & Accounts, has been
named the acting CFO of the company.
Shareholding pattern (%)
Dec-12 Sep-12 Dec-11
Promoter 26.0 26.0 -
Domestic Inst 23.0 23.4 -
Foreign 35.8 33.9 -
Others 15.2 16.7 -
Multi Commodity Exchange of India: an investment profile
Stock performance (Since 8 March 2012)
Current price and recommendationCurrent Reco.
Price (INR)
1,398 Buy
EPS: MOSL forecast v/s consensus (INR)MOSL Consensus Variation
Forecast Forecast (%)
FY13 53.6 58.8 -8.9
FY14 61.9 68.7 -9.9
MCX-SX's launch date has been set on February 9,
2013.
Valuation and view We expect MCX to post transaction fees at a CAGR of
14% over FY13E-15E and EPS at a CAGR 19% during
this period. We currently value the standalone
exchange business at 20x FY15E earnings and
attribute INR110 as value to its stake in MCX-SX.
With the launch of MCX-SX's equity operations
following a successful membership drive, we expect
significant upward revision in potential value
unlocking from MCX-SX for MCX. Maintain Buy.
Sector view
Indian commodities exchanges are highly regulated
and hence under the current regulatory
environment, foreign institutional investors (FIIs),
banks and mutual funds cannot trade on these
exchanges.
Growth potential in an economy like India remains
huge over the next decade, which is expected to
drive the demand for commodities. The increase in
physical market volumes consequently increases
hedging requirements for industry players, thus
influencing derivative trading volumes.
Penetration remains low - globally, futures gold
volumes are 70-80x that of physical trade, v/s 17-18x
in India, 20x in crude v/s ~7x in India, 100x in
aluminum v/s 8-9x in India.
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Multi Commodity Exchange of India
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Financials and Valuation
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Disclosure of Interest Statement Multi Commodity Exchange of India
1. Analyst ownership of the stock No
2. Group/Directors ownership of the stock No
3. Broking relationship with company covered No
4. Investment Banking relationship with company covered No
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