Hold Multi Commodity Exchange of India; target of Rs 4,295: ICICI Securities

ICICI Securities recommended hold rating on Multi Commodity Exchange of India with a target price of Rs 4,295 in its research report dated August 01, 2024.

Broker Research

August 07, 2024 / 14:30 IST

hold

ICICI Securitie's research report on Multi Commodity Exchange of India

Options volumes sustained strong growth in Q1FY25 after breaching INR 1trn mark in Q4FY25. Options ADTV for the quarter grew 29.2% QoQ and stood at INR 1.47trn. This growth in options volumes was partially offset by a decline in premium turnover to 1.61% in Q1FY25 from 1.79% in Q4FY24. Transaction revenues from options increased 25% on a QoQ-basis in Q1FY25 to INR 1.27bn vs. INR 1.01bn in Q4FY24.

Outlook

MCX’s Q1FY25 results had two main takeaways: 1) steady cost profile established; and 2) healthy rise in option volumes offset by lower premium conversion and resurgence in future. We indicated upside risk to earnings from volume surges, basis commodity volatility in our last note, and it has played out on these lines in Q1FY25, leading to earnings upgrade. Overall, commodity volume share has also increased (97.8% in Q1FY25 vs 95.9% in Q4FY24). Basis improved volume and market share show, we raise our multiple from 35x to 40x basis core FY26E PE. Maintain HOLD. Basis our target price of INR 4,295, MCX is trading at 37.5x FY26E PE and 43.2x FY26E core PE (ex-other income).

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