Continued surge in turnover boost performance
About the stock: MCX is the leader in commodity derivatives exchanges in India with ~98% market share in terms of commodity futures turnover
• It has ~100% market share in precious metals, base metals and energy
• Presence in various commodities offers healthy diversification with focus on option volume
Q3FY25 performance: MCX reported revenue from operations at ₹301.4 crore which was up by 57.4% YoY and 5.24% QoQ. EBITDA reported at ₹193 crores against a loss of 19.7 crores YoY, and up by 7.6% QoQ. Net profit of the company stood at ₹ 160 crore against a loss of ₹5 crores in Q3FY24. EBITDA margins was recorded at 64.1% for this quarter. In terms of operations, it recorded a notable growth in options segment, wherein average daily turnover (ADT) rose to ₹2,07,090 crore as against ₹1,93,308 crore for Q2FY25. Average daily premium turnover also increased from ₹3,264 crore to ₹3,613 crore on QoQ basis. There was a notable increase in futures trading as well, wherein ADT climbed to ₹28,410 crore as against ₹ 26,941 crore sequentially. The combined ADT of futures and options more than doubled YoY.
Investment Rationale
• Steady business growth to continue: The total number of registered Unique client code (UCC) continues to grow at a steady pace which now stands at 31.3mn, up by 8.3% QoQ. The number of UCCs that traded on MCX was recorded at 6.9mn in Q3FY25 vs 4.77mn in Q3FY24 and 6.8mn in Q2FY25. This coupled with product innovation and new commodity contracts shall support steady business growth going ahead. In terms of ADT, options premium grew from ₹ 3264 cr to ₹ 3613 cr QoQ. Similarly, Futures ADT increased from ₹ 26941 cr to ₹ 28410 cr QoQ.
• Margins to stay elevated: The company earned 64.1% EBITDA margin in Q3FY25. This quarter includes provision of TCS AMC expense that started this quarter but overall expense managed as select premium services availed by MCX from previous vendor was not continued. We expect EBITDA margin of 66% in FY27 aided by operating leverage.
Rating and Target Price
• Dominant market share and Asset light business model enables MCX to earn superior return ratios with RoE of ~30%. This coupled with steady business growth shall keep valuations on the premium side.
• We value MCX at 40x FY27E PAT ex its income from investment and add cash value to arrive at a target price of ₹ 6750 and change rating from Hold to Buy on the stock.
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