ET Intelligence Group: MCXNSE -0.15 %, India’s largest commodity exchange, will be the biggest beneficiary from increased volatility in gold prices in the listed space.
Total traded value of gold on the exchange for July and August has tripled over last year’s. Average monthly traded value for the past two months is up 70 per cent from the June-quarter monthly mean.
From an average of 21 per cent of the total traded value in the first two months of the September quarter last year, bullion (includes gold, silver and platinum) is now 38 per cent, helping offset the sharp drop in base-metals volumes after the regulator’s requirement of physical delivery for the settlement of contracts. Total traded value of silver and crude too are up 100 per cent and 68 per cent, respectively, for July and August over last year.
This has resulted in total traded value on the exchange to jump 30 per cent during the same period. Analysts expect the company to log revenue growth of 30 per cent for the entire FY20, most of which will flow down to the bottom-line. This will lead to a sharp jump in the earnings, offering non-linear earnings growth.
In the June quarter, earnings growth was 40 per cent over previous year, on operating income growth of 9 per cent and total income growth of 30 per cent. Total income was driven by a sharp jump in interest income, thanks to high cash of about Rs 1,500 crore. Higher EBITDA (operating profit) margins, paced by restrained staff expenses, led to net profit growth of 40 per cent. Operating income and net profit for the June quarter were Rs 80 crore and Rs 40 crore, respectively. Total income for the quarter was Rs 111 crore.
Trading values largely climbed only after June and the earnings growth would be much higher in the September quarter.
Further, the company will also benefit from lower income tax rates (of 25 per cent) announced in the budget for companies with less than Rs 4000
crore in revenue.
According to analysts, MCX’s net profit could rise 45 per cent in FY20, resulting in earning per share of Rs 42. At the current price of Rs 940, its stock is trading at 22 times FY20 earnings multiples. Historically, it has traded at over 30 times.