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The Multi Commodity Exchange has said sales turnover in the September quarter was Rs 88 crore, down 35 per cent over a year. Profits dropped 67 per cent to Rs 27.1 crore.
Besides the impact of the new Commodities Transaction Tax, the results were impacted by the required higher contribution towards a Settlement Guarantee Fund and higher margin requirements for trading in commodities, which had implications on volumes. The Street has reduced its expectations.
"We cut our FY2014 EPS (earnings per share) estimates by 11 per cent and cut our FY2015-16 EPS estimates by four to five per cent,” said Amit Kumar, who tracks the company at Kotak Securities. The stock closed on Tuesday about 10 per cent down, to Rs 432.65 a share.
Volumes will be the key determinant in the coming months. In the September quarter, the CTT impact pushed down volumes to Rs 21 trillion (Rs 1 trillion is equal to Rs 1 lakh crore) as against Rs 39 trillion in the corresponding quarter last year.
Analysts have further taken higher cut in terms of volumes growth expectations and now because of the recurring provisions required for SGF as well. “We change our CTT related revenue decline assumption to 40% from 30% earlier resulting in 25% PAT estimate cut for FY14 and FY15. Our numbers build in a recovery in second half of FY15, which looks increasingly difficult,” said GV Giri who is tracking the company at IIFL.
On the back of lower volumes analyst who is tracking the company at Motilal Oswal Securities is expecting MCX to make an EPS of Rs 30.1 in fiscal 2014 and Rs 26.7 in fiscal 2015. Based on these expectations, at current market price of Rs 432.65 stock is currently trading at 16.2 times its FY15 earnings. "These valuations however do not factor in the value from its stake (including warrants) in MCX-SX, and potential upside from FCRA. If one considers 20 time price to earnings to its FY15 estimates that implies a price of Rs 533 per share, said analyst with Motilal Oswal Securities
More than revenue growth, the profitability was impacted severely.
The impact of new guidelines where Forward Commission has asked to allocate 5% of the gross revenue to SGF has resulted in additional charge. During the quarter MCX earmarked about Rs 13.2 crore towards the SGF. Also, imposition of additional margins requirements of 5% for commodity trades have discouraged volumes at exchange and thus impacting the overall financial performance of MCX. During the quarter total expenditures have gone up by 34% led by provisions for SGF and other overheads. Even after excluding the SGF impact, total expenditures were up 11.23% to Rs 64 crore. This is also a reason that operating profit margin in the quarter has dropped by whopping 4208.3 basis points to 21.24% impacting the reported profits of the company.
Net profit during the quarter took a hit by 67% to Rs 27.04 crore. Thankfully the company has retained its market share at 89% in first half of current financial year and requirements for additional margins for trading in commodities is removed which should be positive.
