Buy Multi Commodity Exchange; target of Rs 1780: HDFC Securities

HDFC Securities is bullish on Multi Commodity Exchange has recommended buy rating on the stock with a target price of Rs 1780 in its research report dated July 31, 2023.

Broker Research

August 03, 2023 / 08:55 IST

Buy

26 Aug, 2025 12:21

Volume

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HDFC Securities' research report on Multi Commodity Exchange

MCX reported a strong revenue growth of 9.0% QoQ, led by options, while its profitability was impacted by high technology costs. The technology transition remains the key overhang for the exchange and the extension of the tech contract with the existing vendor (INR 1.25bn/quarter) will impact its profitability in FY24E. As per the management, the tech transition was extended due to (1) delays in audit and regulatory clearances; (2) challenges in EOD/BOD batch file processing; and (3) a lack of complete testing. The management is hopeful of completing the transition before the Dec-23 deadline. The options revenue grew 23% QoQ, supported by growth in options ADTV; however, the premium to notional turnover ratio (1.9% in Q1) is coming down gradually. We remain constructive on the options growth story, supported by increasing retail participation, the launch of new contracts (mini and index options) and a pickup in bullion volumes. We expect the options revenue to grow +68/27% YoY while futures will decline 5/2% in FY24/25E. We increase our revenue estimates by ~2% for FY24/25E due to options.

Outlook

We maintain our BUY rating with a target price of INR 1,780, based on a P/E of 23x June-25E core PAT + net cash.

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