UBS has raised its target price for Multi Commodity Exchange of India from Rs 7,000 to Rs 10,000, maintaining its 'buy' rating. The brokerage highlighted several factors contributing to this optimistic outlook.
It noted that "blocks are in place" for MCX, citing favourable market dynamics and new product launches. The volatility in key commodities' prices is expected to drive volume growth, with MCX's trading volume showing robust performance since April.
"Futures average daily value is up around 50% QoQ and option premiums' ADV is up around 30% QoQ," UBS said. This growth is anticipated to continue amid geopolitical uncertainties.
It also highlighted the improving pace and visibility of new product launches. MCX has recently introduced electricity derivatives and monthly silver options.
UBS' initial analysis suggests a potential revenue contribution of 3-12% from electricity derivatives. Despite limited details, UBS conservatively estimates that "electricity derivatives may contribute about 3% of revenue in FY28, with upside potential". The new silver options are expected to gain traction, similar to the success of monthly gold options launched in November 2024.
UBS further highlighted the robust Q1 ADV, with futures up approximately 50% QoQ and option premiums up around 30% QoQ. The brokerage estimates trading revenue growth of about 34-35% QoQ and a PAT increase of around 50% due to seasonal expenses.
"The market is not fully pricing in new products' growth potential and operating leverage benefitting from higher volume," the brokerage said.
It expects a 26% earnings CAGR for FY26-28, based on operating leverage and is meaningfully ahead of consensus, anticipating expectations to increase by 15-20%, similar to last year.
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