MCX’s 1QFY14 revenue at INR1.23b (flat YoY, 1.8% QoQ) was in line with our
estimate. EBITDA margin at 51.5% was below our estimate of 56.2% due to higher
staff and admin costs. PAT at INR601.2m (-7.1% YoY and -21.5% QoQ) was lower
than our estimate of INR635.4m, driven by lower operating profit.
Flattish revenue YoY and marginal growth QoQ was on the back of total volumes
value of INR37.5t, growth of 4% QoQ and 3% YoY.
Volumes were driven by contrasting trends in gold and silver during the quarter.
Volumes in gold were up 20% QoQ and 15% YoY, while silver volumes declined
13% QoQ and 25% YoY. Gold and silver together contributed 51% to overall
volumes on the exchange, down ~5pp YoY. Crude oil (21% concentration)
volumes were up 20.5% QoQ and 19.5% YoY.
CTT became effective from July 1st and hence the impact of the same does not
reflect in 1QFY14. However, going forward, we expect MCX’s volumes to be
severely impacted (ADV down ~43% in July v/s 1HCY13).
Following the imposition of CTT, average daily volumes in July fell ~43%,
compared to the average daily volumes in the first six months of CY13. We factor
this as the trend in volumes going forward; our current estimates for FY14E and
FY15E do not assume any benefits from factors such as FCRA.
Earnings are expected to decline significantly going forward and we estimate 40%
decline in FY14E EPS, corresponding to a 30% decline in FY14E volumes. We value
MCX using the SOTP method – adding the potential value from sale of stake
through direct holding and warrants in MCX-SX, to the exchange’s business.
We value the exchange at 20x FY15E EPS – arriving at INR750 per share, and
another INR110 per share from stake in SX (valued at INR15b, ~37% of that
accruing to MCX). Maintain Buy.
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estimate. EBITDA margin at 51.5% was below our estimate of 56.2% due to higher
staff and admin costs. PAT at INR601.2m (-7.1% YoY and -21.5% QoQ) was lower
than our estimate of INR635.4m, driven by lower operating profit.
Flattish revenue YoY and marginal growth QoQ was on the back of total volumes
value of INR37.5t, growth of 4% QoQ and 3% YoY.
Volumes were driven by contrasting trends in gold and silver during the quarter.
Volumes in gold were up 20% QoQ and 15% YoY, while silver volumes declined
13% QoQ and 25% YoY. Gold and silver together contributed 51% to overall
volumes on the exchange, down ~5pp YoY. Crude oil (21% concentration)
volumes were up 20.5% QoQ and 19.5% YoY.
CTT became effective from July 1st and hence the impact of the same does not
reflect in 1QFY14. However, going forward, we expect MCX’s volumes to be
severely impacted (ADV down ~43% in July v/s 1HCY13).
Following the imposition of CTT, average daily volumes in July fell ~43%,
compared to the average daily volumes in the first six months of CY13. We factor
this as the trend in volumes going forward; our current estimates for FY14E and
FY15E do not assume any benefits from factors such as FCRA.
Earnings are expected to decline significantly going forward and we estimate 40%
decline in FY14E EPS, corresponding to a 30% decline in FY14E volumes. We value
MCX using the SOTP method – adding the potential value from sale of stake
through direct holding and warrants in MCX-SX, to the exchange’s business.
We value the exchange at 20x FY15E EPS – arriving at INR750 per share, and
another INR110 per share from stake in SX (valued at INR15b, ~37% of that
accruing to MCX). Maintain Buy.
Impact of CTT to reflect from 2QFY14, drag performance
CTT became effective from July 1st and hence the impact of the same does not
reflect in 1QFY14. However, going forward, we expect MCX’s volumes to be
severely impacted. This will in turn, drag the financial performance even more,
considering the operating leverage in the business model.
Our expectation comes on the back of a sharp decline witnessed in the average
daily turnover at MCX in the month of July. The Daily turnover on the exchange
is down ~43% to INR277b in July, as compared to that seen in the first six
months of the calendar year.
CY13 Avg Daily turnover (INR b)
January 499
February 506
March 438
April 510
May 469
June 482
1HCY13 average 484
July 277
Change in volumes (in July v/s 1H) -42.70
Source: Company, MOSL
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