Scaling new heights; improving visibility
We recently met with MCX management. We gained more confidence in their strategic direction, which includes (1) launching new products such as monthly series and index options, (2) continuously enhancing the technology stack, and (3) focusing on increasing institutional participation and hedging activity on the platform. The appointment of the new MD & CEO, Mrs. Praveena Rai, will significantly boost these strategic initiatives. Additionally, MCX is well positioned to withstand ongoing regulatory challenges like (1) the curb on index options volume, (2) the reversal of interest earned on clearing funds to CMs, and (3) true-to-label charges, which will discontinue the practice of levying slab-wise fee structures. The MCX commodity futures and options volumes are witnessing strong growth but is still in its infancy when compared to equity derivative markets. We believe that MCX will witness sustained growth in options volume and new products will fill the gaps and provide additional support to the growth story. We expect notional/premium volume to register a +61/43% CAGR over FY24-27E. We maintain our revenue and EPS estimate but increase the multiple to 40x vs 35x earlier based on better visibility. We maintain our BUY rating with a target price of INR 6,000, based on 40x Sep26E core EPS + net cash ex-SGF.
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