Buy MCX; target of Rs 4300: Motilal Oswal

Motilal Oswal's research report on MCX

MCX will be looking to grow volumes driven by new products, such as Steel Bar (launched), Gold Serial contracts, and Power contracts. Once the future volumes on these products exceed the threshold of INR8-10b (one-year average ADTO) options, contracts will also be launched. Retail participation in the Indian commodities market (1.4m UCCs) is low when compared to equity market participation (40m NSE active clients). Strong technology-based offerings from discount brokers, along with lower ticket-size contracts from MCX, can improve the participation significantly. FPIs, last year, received approval from the regulator to invest in cash-settled commodities. In a follow-up to the same, MCX has launched its direct market access (DMA) facility for Category-I FPIs. Once the same is available to Category –II FPIs, we believe, the volume momentum will pick up notably. Regulatory measures, such as interoperability of margins between stock exchanges and commodity exchanges, allowing partial withdrawal of SGF or determining clients' margin requirements on net positions, if implemented, have the potential to further boost volumes.

Outlook

We expect MCX to deliver an FY24-26 revenue/EBITDA/PAT CAGR of 28%/ 205%/157%, fueled by a 47% CAGR in options volumes. We upgrade the stock to BUY from Neutral with a TP of INR4,300 (premised on 36x FY26E EPS).

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MCX - 10042024 - moti