MCX shares up 350% in 2 years; here are key triggers for stock

Multi Commodity Exchange of India Ltd (MCX) has seen its shares rallying 350 per cent in the past two years, but MOFSL believes the stock can still be a 'Buy'. The domestic brokerage suggested a target price of Rs 6,500 that hints at 16 per cent potential upside on MCX. 

MOFSL expects MCX to deliver a growth of 31 per cent in revenue, 154 per cent in Ebitda and 119 per cent in profit after tax (PAT) over FY24-27 compounded annually, due to 56 per cent growth in options volumes. 

It highlighted several near- to medium-term drivers of volume growth, including new product launches such as index options, 10g monthly gold futures, cotton seed wash oil, crude sunflower oil contracts and many more in pipeline.

Besides, it said a continued volatility in key commodity prices such as gold, crude oil & natural gas amid global uncertainties; and a rise in retail participation in the options market, would drive volumes. 

"We expect no impact from competition on MCX's volumes, as similar products are currently available on other exchanges. With the technology overhang behind MCX and near-term potential drivers in place, we see meaningful re-rating potential. We reiterate our BUY rating on the stock with a target price of Rs 6,500 (premised on 42 times Sept’26E EPS)," MOFSL said.

The domestic brokerage said retail participation has increased to 9 lakh participants. Retail
participation can strengthen further with new product launches, a change in the transaction rate structure, strong technology-based offerings from discount brokers, and lower ticket-size contracts from MCX.

"FPIs are showing good traction. MCX currently has around 100 FPIs actively trading on its platform, of which around 90 belong to the CAT I category and 10 to CAT II. With the launch of its direct market access (DMA) facility, along with regulatory support and rising participation, MCX expects strong volume growth," MOFSL said.

Also, the brokerage said regulatory measures, such as true-to-label charges and the pass-on of interest earned on clearing corporation, will not have much impact on the company’s
profitability. True-to-label charges have to be implemented and all exchanges have to charge flat fee from October 1, 2024. 

"MCX will start paying the AMC to TCS, which will be fixed in nature, causing no volatility like the previous quarters. This will lead to a marked improvement in profitability. MCX has not charged any penalty to TCS so far. With the completion of this transition, the management's will now focus on scaling up the business," MOFSL said.