SBI Securities has recommended a ‘buy’ on Multi-Commodity Exchange (MCX), citing strong growth potential. The brokerage set a 12-month target price of ₹6,743.60, indicating a possible 16% increase from its closing price on Tuesday.
Here are the five main reasons for their optimism:
Strong Volume Growth:
MCX’s Average Daily Turnover (ADTO) grew 17.2% month-on-month to ₹2.5 lakh crore in September 2024. Options turnover rose 18.6%, while futures turnover increased 6.7%. MCX is expected to achieve a 50% compound annual growth rate (CAGR) between FY24 and FY27.
Improved Fee Transparency:
Starting October 1, 2024, MCX will switch to a flat fee model instead of the slab-wise system, making fees more transparent and benefiting traders.
TCS Partnership:
MCX’s new deal with TCS for software services will reduce cost fluctuations, helping to boost profitability and allowing the company to focus on expanding its business.
Product Expansion:
MCX plans to introduce new weekly contracts, gold contracts, and index options. It has already launched mini base-metal contracts, which make up 10% of the volume of main contracts.
Attractive Valuation:
MCX shares are trading at 61.3x/48.7x earnings estimates for FY25/FY26, making the stock an appealing investment. SBI Securities sees continued growth driven by new products and structural improvements.
MCX dominates India’s commodity derivatives market with a 97.84% share as of June 2024 and ranks among the top exchanges globally. Its fully-owned subsidiary, MCX Clearing Corporation Limited, ensures smooth fund settlements through 217 clearing members.
At 12:30 PM today, MCX shares were trading flat at ₹5,851.80 on the BSE.
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