MCX - Positive Surprise In Volumes Lead To Earnings Upgrades: ICICI Securities

ICICI Securities Report

Volumes have been strong in Multi Commodity Exchange of India Ltd. across options and futures, as well as the premium conversion rates in August 2024 after a weak July-24. The combination of all three revenue drivers (futures, options and premium conversion rate) exhibiting strength has led to our earnings upgrades (14.8%/22.7% in FY25E/FY26E).

However, we maintain Hold, considering the limited visibility of volumes which inhibits further multiple upgrades. Without an upgrade in its multiple, current valuations factor possible volume growth hereon adequately. So,

1. if we factor in options growing by two times compared to futures between Aug-24 and FY26;

2. keep FY26E premium conversion rate at 1.4%; and

3. value MCX basis 35 times FY26E PE, the volume ask is that of ~38%/76% growth in futures/options between Q 1FY25 and FY26E (even at 40 times multiple it is ~30%/60%).

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