MCX down 8%, Morgan Stanley predicts 48% decline after fourth-quarter results

Shares of Multi Commodity Exchange (MCX) fell 7.7 percent to Rs 3,715.15 in intraday trading on Wednesday after the commodity exchange’s March quarter (Q4FY24) results fell short of street expectations. In view of this, global brokerage Morgan Stanley has maintained an “underweight” rating on the stock with a target price of Rs 2,085. This represents a significant decline of 48.2% from current levels.

The stock was down 6.5 percent at Rs 3,765 as of 12:00 noon, while the benchmark S&P BSE Sensex rose 0.4 percent.

Revenue fell 5.4% to Rs 181.1 crore in Q4FY24, though the company returned to profitability on a quarterly basis with a net profit of Rs 878 million.

On an annualized basis, MCX posted a profit of Rs 5.4 crore in Q4FY23 on revenue of Rs 133.75 crore. Interest, Taxes, Depreciation and Amortization (Ebitda) grew by 443% year-on-year to Rs 12.033 crore as compared to Rs 22.15 crore in the corresponding period of the previous fiscal.

Morgan Stanley said MCX’s fourth-quarter 2024 revenue was 8% lower than expected, while core Ebitda and net profit fell 20% and 15%, respectively, from expectations.

“Operating revenue was lower than expected. Additionally, costs were higher than expected. Hence, we look forward to the recurring cost information as well as segment revenue details during the analyst call.”

Meanwhile, foreign portfolio investors (FPIs) are allowed to participate in certain cash-settled non-agricultural commodity derivatives contracts and indices.

“FPIs falling under individual, family office and corporate categories will be allowed to participate in eligible cash-settled non-agricultural commodity derivatives contracts, as well as indices containing such cash-settled non-agricultural commodities,” MCX said on April 20.

FPIs fall under the following categories: Position limits for individuals, family offices and corporates in eligible commodity derivatives contracts and indices will be 20% of the client level position limit, it added.

In the first nine months of fiscal 2024, energy contracts accounted for approximately 78% of MCX’s average daily options and futures trading volume. Also, MCX’s share in the Indian energy futures market is 99.52%.