MCX - The Tech Transition Saga Continues, FY24 EPS Cut By 69%: Motilal Oswal

Motilal Oswal Report

Multi Commodity Exchange of India Ltd. has decided to extend its support services contract with software vendor, 63 Moons Technologies Ltd., for six months beginning from July 01, 2023 at a consideration of Rs 1.25 billion per quarter.

The previous extension was from January 01, 2023 to June 30, 2023 at a cost of Rs 810 million per quarter.

This is the third extension by MCX. The first was from October 01, 2022 to December 31, 2022 at a cost of Rs 600 million.

As a result, we cut our FY24 earnings per share estimate by 69% to Rs 14.7. Tech costs for FY25 remain broadly unchanged.

We also note that volumes in Q1 FY24 for both futures and options have been better than our forecasts, and hence the cut in FY24 estimates is relatively lower. We increase our FY25 EPS estimate by 8%.

The delay in transition will impact new product launches as well as increasing foreign portfolio investment participation in the segment.

We maintain our 'Neutral' rating on the stock with a revised one-year target price of Rs 1,400.

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