Neutral MCX Ltd For Target Rs.1,400 - Motilal Oswal
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The tech transition saga continues, FY24 EPS cut by 69%
* MCX has decided to extend its support services contract with software vendor, 63 Moons Technologies Ltd., for six months beginning from 01st Jul’23 at a consideration of INR1.25b per quarter.
* The previous extension was from 1st Jan’23 to 30th Jun’23 at a cost of INR810m per quarter.
* This is the third extension by MCX. The first was from 1st Oct’22 to 31st Dec’22 at a cost of INR600m.
* As a result, we cut our FY24 EPS estimate by 69% to INR14.7. Tech costs for FY25 remain broadly unchanged.
* We also note that volumes in 1QFY24 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 FPI participation in the segment.
* We maintain our Neutral rating on the stock with a revised 1-year TP of INR1,400.
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