MCX slumps 7% on below-estimate Q4 earnings, Morgan Stanley remains 'underweight'

April 24, 2024 / 10:27 AM IST

After the March quarter results, MCX share prices have reacted negatively and the stock is under pressure, according to analysts. However, the overall trend looks positive, and investors will have to see whether it will resume uptrend in the near term.

Shares of commodity exchange MCX fell over 7 percent in early deals on April 24, a day after it reported positive but below-estimate numbers for the quarter ended March 2024. After reporting losses in the last two quarters, the company earned a net profit of Rs 87.8 crore in Q4 and reported a 35 percent on-year rise in its revenue to Rs 181.1 crore.

The MCX board also declared a final dividend of Rs 7.64 per equity share for FY24. As per the regulatory filing, the company's operating income during the quarter under review jumped 35.43 YoY to Rs 181.14 crore, but fell 5.42 sequentially.

The MCX saw its margins expand sharply to 56.3 percent as against 1.6 percent during the same period of the previous fiscal.

Morgan Stanley maintained its 'underweight' rating on the stock with a target price of Rs 2,085, implying a downside of around 48 percent. It is of the view that the company missed Q4 net profit (PAT) estimates and consensus sharply. Also, the operating revenue came in lower than estimates.

Additionally, the firm's costs came in higher than estimates. The international brokerage pointed out that it awaits the analyst call to get details on the operating revenue breakdown and understand recurring costs better.

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At 9:53am, the MCX shares were trading at Rs 3,749.55 on the National Stock Exchange, down 6.9 percent from the previous close. The stock has zoomed 155 percent in the last one year, massively outperforming benchmark Nifty 50 which has risen 26 percent during this period.

Earlier this month, Motilal Oswal bumped up its rating on the stock to a 'buy' with a target price of Rs 4,300 per share. MCX is looking to grow volumes by launching new products, such as Steel Bar, Gold Serial contracts, and Power contracts.

"Once the future volumes on these products exceed the threshold of Rs 8oo-1,000 crore (one-year average daily turnover) options, contracts will also be launched," the brokerage said.

Around 90 percent of the current volumes in the options segment are from the crude oil and natural gas segments. MCX could launch smaller contracts and weekly expiry products in the bullion segment, which will boost volumes, analysts said.

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MCX is also looking to launch power future contracts, which are unavailable in the market at present.

"The approval for these contracts rests with the SEBI and CERC. Considering the interest from private companies looking to sell their surplus captive power generation, there is substantial potential for these contracts, said Motilal Oswal in its report, adding that some regulatory measures can help boost participation for the MCX.

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