Hold Multi Commodity Exchange of India; target of Rs 5348: ICICI Securities

ICICI Securities recommended hold rating on Multi Commodity Exchange of India with a target price of Rs 5348 in its research report dated September 03, 2024.

Broker Research

September 03, 2024 / 12:07 IST

hold

live

bselive
nselive

Volume

Todays L/H

ICICI Securities research report on Multi Commodity Exchange of India

Volumes have been strong in MCX across options and futures, as well as the premium conversion rates in Aug’24 after a weak Jul’24. The combination of all three revenue drivers (futures, options and premium conversion rate) exhibiting strength has led to our earnings upgrades (14.8%/22.7% in FY25E/FY26E). However, we maintain HOLD, considering the limited visibility of volumes which inhibits further multiple upgrades. Without an upgrade in its multiple, current valuations factor possible volume growth hereon adequately. So, (1) if we factor in options growing by 2x compared to futures between Aug’24 and FY26; (2) keep FY26E premium conversion rate at 1.4%; and (3) value MCX basis 35x FY26E PE, the volume ask is that of ~38%/76% growth in futures/options between Q1FY25 and FY26E (even at 40x multiple it is ~30%/60%).

Outlook

Our valuation is based on 40x multiple on FY26E adjusted EPS of INR 130 per share (ex-software amortisation cost and income from investments, both net of taxes) while adding free cash and investments of INR 147/share (ex-SGF, ex-margin money, exmandatory reserves). Our revised target price stands at INR 5,348 (earlier INR 4,295).

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