On Tuesday, Investec, a financial services company, updated its outlook on Multi Commodity Exchange of India Ltd (MCX:IN), raising the price target significantly to INR6,900.00 from the previous INR3,800.00. Despite the substantial increase in the price target, the firm maintained a Hold rating on the stock.
The adjustment in the price target comes after MCX showcased a strong 22% quarter-over-quarter revenue growth, which was attributed mainly to the sustained increase in options volumes and a rise in the number of participants.
The company's earnings before interest, taxes, depreciation, and amortization margin (EBITDAM) also saw an improvement, reaching 66%, bolstered by enhanced operating leverage.
Investec highlighted MCX's robust overall profitability growth, which remained strong even after accounting for contributions to the Settlement Guarantee Fund (SGF). The analyst firm expects MCX to continue its strategy of diversifying product offerings, introducing new contracts, and broadening its participant base.
Looking forward, Investec forecasts a 45% compound annual growth rate (CAGR) in MCX's revenue over the financial years 2025 and 2026, driven by a projected 57% CAGR in options volumes. This is anticipated to result in a 40% growth in earnings per share (EPS) for the financial year 2026 estimate (FY26e). Following these projections, Investec has raised its EPS estimates by 28%.
Despite the optimistic growth prospects, the analyst firm considers the current valuation of MCX to be on the higher side, with a price-to-earnings (P/E) ratio of 43 times the FY26e earnings. As a result of the expensive valuation, the decision was made to retain the Hold rating even after revising the target price to INR6,900.00.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.