BSE, MCX Q4 results: BSE enjoys multiple growth levers; MCX banks on option volume surge
3 min read 22 May 2023, 04:11 PM ISTWhile BSE showed multiple levers for growth in revenue and earnings over the medium term, MCX seemed poised to leverage its growth in options volumes for future revenue growth.
PremiumBSE and the Multi Commodity Exchange of India (MCX), the only listed exchanges in the country, have released their earnings for the fourth quarter of FY23. While BSE showed multiple levers for growth in revenue and earnings over the medium term, MCX remains well poised to leverage its growth in options volumes for future revenue growth, say analysts.
BSE’s net profit in Q4FY23 rose 24% YoY to ₹88.61 crore. The exchange’s revenue from operations grew 11% to ₹227.01 crore from ₹204.59 crore in the year-ago period.
PAT growth was driven by higher-than-estimated revenue in non-transaction securities services and strength in income from the tech subsidiary and clearing corporation, brokerage firm Motilal Oswal Financial Services said in a note.
Read here: BSE net profit rises 24% in March quarter
BSE’s operating revenue registered 14% YoY growth beating analysts’ estimates. Transaction charges declined 13% YoY on account of cash volumes, which was offset by the currency segment, book building fees and a higher contribution from mutual funds.
“BSE has multiple levers for growth in revenue and earnings over the medium term, such as continued momentum in the Star MF business, levy of charges on equity derivatives, levy of charges on the INX platform, possibility of levying a fee for listing of debt securities, start of operations at its Power Exchange, and commencement of revenue from its Gold Spot exchange," the domestic brokerage said.
Motilal Oswal has increased its FY24/FY25 revenue estimates for BSE by 14%/12%, factoring in strong growth in the securities services segment (excluding transaction charges). It reiterated Neutral rating with a SoTP-based one-year target price of ₹550 per share on BSE.
On May 15, BSE also relaunched Sensex and Bankex derivative contracts in its bid to boost derivative trading. It relaunched the derivative contracts with a reduced lot size of futures and options and a new expiry cycle of Friday as against the expiry cycle of Thursday earlier.
Read here: What’s behind BSE’s decision to relaunch derivatives?
On the other hand, MCX, the largest commodity trading exchange in the country, recorded consolidated revenue from operations of ₹133.75 crore up by 25.63% YoY from ₹106.46 crore in Q4FY22. Its consolidated net income stood at ₹153.83 crore as compared to ₹121.04 crore, YoY.
The company’s profit after tax (PAT) was at ₹5 crore for the March quarter while operating profit was at ₹2 crore dragged by higher software expenses that were at ₹87 crore.
Analysts believe higher software costs may continue in Q1FY24 based on the existing agreement with former software vendor.
MCX’s futures ADTV dipped around 15% QoQ which was offset by strong options ADTV growth of 16%, resulting in 4% growth in overall turnover.
“Increasing options volumes have been the key investment thesis for the company and Q4FY23 saw this trend continuing as options ADTV (notional) touched an all-time high of ₹55,000 crore in March 2023," ICICI Securities said.
It believes continued traction in options volumes along with new lower size contracts could aid revenue growth going forward. However, impact of lower software cost could potentially lift EBITDA, which will likely be partially offset by increased amortisation expense.
Going ahead, uncertainty in final transition to new software platform and possible lower other operating income post the implementation of blocked funds regulation even for secondary markets would be key overhang for the stock.
ICICI Securities maintains Hold rating on MCX with a target price of ₹1,412 per share.
While BSE declared a final dividend of Rs12 per equity share for the FY23, MCX announced a dividend of ₹19.09 per equity share.
BSE shares command a market capitalisation of ₹7,152.44 crore and trade at a trailing twelve-month P/E of 32.34x. Whereas, MCX boasts a market cap of ₹6,750.90 crore and trades at a P/E of 37.39x.
On Monday, shares of BSE ended 0.73 % higher at ₹528.00 apiece, while MCX shares fell 2.05% to end at ₹1,323.75 apiece on the NSE.
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