Multi Commodity Exchange of India (MCX) shares settled more than 4 percent higher on Wednesday after brokerage firm Jefferies initiated coverage on the stock with a "buy" rating and a target price of Rs 3,600, implying an upside of up to 27 percent from Tuesday's closing level.
The stock climbed 5.49 percent to an intraday high of Rs 2,993 per share on the NSE. It later pared some gains due to profit booking and closed at Rs 2,963 per share, up 4.43 percent.
Jefferies said penetration in India's commodity derivatives market is expected to increase, with MCX continuing to enjoy a near-monopoly in non-agricultural contracts.
The brokerage expects the average daily turnover in Indian commodity futures and options to grow threefold and sixfold, respectively, over the next decade.
It also said MCX's strong cash flows, along with its net cash position, could support higher dividend payouts.
Jefferies projects the company's revenue to grow at a compounded annual rate of 20 per cent between FY26 and FY29. It expects average daily turnover in commodity futures and options to grow at a compounded annual rate of 5 per cent and 28 per cent, respectively, from the elevated FY26 base.
According to the brokerage, MCX has multiple growth opportunities that could drive 15-20 per cent additional upside to earnings over the medium term. These include the coal exchange, colocation services, participation of foreign portfolio investors in non-cash derivatives, weekly options contracts, expansion into products such as battery metals and chemicals, and higher retail participation.
Jefferies also noted that only about one-fifth of NSE options traders currently trade MCX options.
The brokerage expects MCX's earnings before interest and tax (EBIT) margin to expand by 260 basis points between FY26 and FY29, supported by operating leverage. It said the benefit from operating leverage is expected to offset technology costs and fees paid to the Securities and Exchange Board of India (SEBI).
"MCX is more profitable compared to BSE due to the former's lower regulatory fees because of a higher share of longer-dated contracts and no clearing charges," Jefferies said.
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