MCX share price extends rally to hit record high; UBS lifts target on near-term growth drivers, sees 25% more upside | Mint
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Business News/ Markets / Stock Markets/  MCX share price extends rally to hit record high; UBS lifts target on near-term growth drivers, sees 25% more upside
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MCX share price extends rally to hit record high; UBS lifts target on near-term growth drivers, sees 25% more upside

MCX’s operations have been smooth after the transition to a new platform. Volume at the exchange returned to normal levels with futures average daily value (ADV) at ₹220 billion and options ADV at ₹830 billion during 27-30 October, UBS said.

MCX Commodity Exchange (Company)Premium
MCX Commodity Exchange (Company)

Multi Commodity Exchange of India, or MCX share price continued its upward trend for the fourth consecutive session on Thursday and hit a 52-week high led by strong buying interest in the stock. MCX shares have rallied over 7% in the past one week.

On Thursday, MCX shares gained as much as 2.43% to a record high of 2,447.40 apiece on the BSE.

However, there is more steam left and MCX shares may see 25% more upside over the next 12 months as the company has its near-term growth drivers in place, according to brokerage firm UBS.

The brokerage maintained its ‘Buy’ rating on MCX shares and raised the target price to 3,000 from 2,100 earlier, implying an upside of over 25% from Wednesday’s closing price.

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In October, the largest commodity bourse in the country MCX went live with its new commodity derivatives platform (CDP) after it received approval from Sebi's Technical Advisory Panel.

UBS noted that MCX’s operations have been smooth after the transition to a new platform. Volume at the exchange returned to normal levels with futures average daily value (ADV) at 220 billion and options ADV at 830 billion during 27-30 October. 

The brokerage pointed out several near- to medium-term drivers of volume growth for MCX. These include new futures (Steel TMT) and options (shorter duration contracts) product launches; continued volatility in key commodity prices (gold, crude) amid global uncertainties; and a rise in retail participation in the options market. 

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Moreover, the brokerage expects no impact from competition on MCX’s volumes, as similar products are currently available on other exchanges. 

“We expect MCX to maintain its leadership in commodity trading by attracting volume with better liquidity. We will continue to track volume closely to assess potential competitive risk," UBS said. 

MCX stock has delivered more than 65% return in the past six months with the completion of the transition, and is trading at 31x 12-month forward PE, adjusted for one-off costs. 

The brokerage believes the market has not fully factored in higher operating leverage and the growth potential of new products in the near to medium term.

Also Read: NSE Q2 FY24 profit surges 13%, revenue up 24%

“With the technology overhang over and near-term potential drivers in place, we see meaningful re-rating potential," UBS added.

It forecasts a 21.8% revenue CAGR, driven by an increase in futures and options ADV over the next two years. New products to be launched should also support growth. It also expects meaningful improvement in profitability from FY25E, after the company moved to the new technology platform. 

UBS estimates EBITDA margin to improve to 55.7% in FY25-26, aided by operating leverage benefits. 

At 1:10 pm, MCX shares were trading 0.87% higher at 2,410.00 apiece on the BSE.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 02 Nov 2023, 01:11 PM IST
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