Broker’s call: MCX (Sell)

Target: ₹3,435

Target: ₹3,435

CMP: ₹4,161.25

In Q4FY24, Multi Commodity Exchange of India (MCX) delivered revenue growth of 35.4 per cent on a y-o-y basis on the back of improving average daily turnover (ADT) of options contracts, which increased by 148.7 per cent on a y-o-y basis. MCX has reported an EBITDA margin of 56.3% in Q4-FY24 as the contract with 63 moons technologies, which previously weighed on margins expired in December 2023.

With the cessation of technology-related costs, MCX’s EBITDA margins have attained their highest level since 2014. We expect MCX to continue with the current margin trajectory for the foreseeable future.

The company is targeting the launch of multiple products, such as a 10g gold monthly contract, a few agri commodities, a mini metals contract, etc. Additionally, the cotton candy contract is scheduled for launch in the upcoming season in October’24.

MCX has effectively addressed a significant concern by successfully launching the CDP platform. MCX is now at a pivot point where it is gaining massive traction in options contracts, rapidly expanding product offering, regulatory tailwind, and margin expansion expected from the CDP platform. We have revised our estimates and maintained our rating at Sell with a target price of ₹3,435 (40x FY25E EPS) because the positives have largely been factored in.

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