Buy Multi Commodity Exchange; target of Rs 1310: Edelweiss

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26 Aug, 2025 12:21

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Edelweiss' research report on Multi Commodity Exchange

Multi Commodity Exchange’s (MCX) Q2FY18 earnings were stable and on expected lines (PAT at INR283mn). The quarter was characterised by good revival in volumes—ADTV up >17% QoQ (albeit, still below historical run rate)—but lower realisations restricted operating revenue growth to <13% YoY. Meanwhile, the company reported second consecutive quarter of controlled opex (flat QoQ), which bolstered earnings. This also vindicates our stance that as volume growth kicks in, MCX will reap benefit of operating leverage. Post demonetisation and GST, volumes have rebased, but post that growth has been encouraging. Additionally, structural levers such as: a) introduction of options & institutional participation; and b) shift from dabba trading post demonetisation, will provide a leg up. Overall, structural growth visibility and MCX’s leadership are envisaged to drive the stock’s further re‐rating. Maintain ‘BUY’.

Outlook

Volumes clocked much anticipated revival and initial signs of operating leverage benefits were apparent in Q2FY18. Benefits will be more prominent when volumes see uptick in FY19. Volumes can possibly grow upwards of 25% in FY19E with options being rolled out and institutions (AIF, MF and PMS) also being permitted to trade by FY19, leading to spurt in earnings. At CMP, the stock is trading at ~32x FY19E P/E. We maintain ‘BUY/SP’ with target price of INR1,310.

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