MCX options volume is scaling new highs and the futures volume is catching up. Post the tech transition in Oct-2023, the options volume is up 60% and the futures volume is at a multi-quarter high. We believe MCX will be the least impacted by the ongoing regulatory risk as (1) it has near-zero exposure to weekly options, (2) crude, which is ~80% of options volume, is monthly expiry and gold has bimonthly expiry, (3) the number of retail options traders on MCX platform is ~17/23% of NSE/BSE, and (4) growth in options premium ADTV (~106% YoY in FY24) is led by the rise in the options traders (+81% YoY) while the exposure per option traders per day is only INR 23K up 14% YoY. There has been a delay in the appointment of the new MD & CEO—the final list of candidates is with the regulator and we expect the announcement soon. The new strategic direction will be on launching new products, enhancing the technology stack, increasing institutional participation/hedging, and improving profitability. The launch of monthly series contracts (subject to regulatory approval) is expected to boost notional/premium volume by ~50/17%. The premium-to-notional ratio will decline as there is a shift to weekly expiry. We expect notional/premium volume to register a +58/39% CAGR over FY24-27E. We increase our EPS estimate by 8/5% for FY25/26E to factor in the options volume surge. We maintain our BUY rating with a target price of INR 4,400, based on 35x FY26E core EPS + net cash ex-SGF
Valuations and view: MCX is up ~13/28% in the last 1M/6M vs BSE, which is down -12/+3% in the last 1M/6M. The rising volumes, stable tech platform, and the option value linked to the launch of new products are resulting in outperformance vs peers. The stock has traded at an average one-year forward P/E of ~33x and is currently trading at a P/E of 41/31x FY25/26E EPS. We expect further rerating with the announcement of the new MD & CEO and more clarity on the timeline of new product launches.
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