MCX hits new low after Morgan Stanley downgrade

Morgan Stanley downgraded the stock to 'underweight' from 'equal weight'; cut its target price to Rs 590 from Rs 1,020

Shares of Multi Commodity Exchange (MCX) fell to a new low in Wednesday’s trading after Morgan Stanley downgraded the stock to ‘underweight’ from ‘equal-weight’ and cut its price target to Rs 590 from Rs 1,020. At 1:10 PM on Wednesday, MCX shares were down 6.8% at Rs 645.

Morgan Stanley said it expects the company’s earnings per share to decline by 34% in 2013-14 and 13% in 2014-15 with average daily value traded (ADV) at the exchange falling 40% following the Commodity Transaction Tax (CTT) levy. 

Against this backdrop, the stock’s valuation at 21 times 2014-15 estimated earnings is not cheap, said the investment bank.

“Given the weak outlook for bullion/base metal prices, we don’t expect much pickup in ADV (average daily value traded) from current levels over the next two years,” said Morgan Stanley’s analysts led by Subramanian Iyer in a client note.

MCX shares have fallen roughly 18% in July.