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On Wednesday, UBS adjusted the price target for Multi Commodity Exchange of India Ltd (MCX:IN), bringing it down to INR7,800 from INR8,000, while continuing to recommend a Buy rating on the stock. The revision follows the appointment of a new CEO at MCX, which has prompted positive expectations for the introduction of new products.
These anticipated offerings include options for METLDEX, a base metal index, and BULLDEX, a bullion index, alongside other potential products such as electricity derivatives and single commodities weekly options.
MCX reported a strong year-over-year revenue increase of 57% in the third quarter, which, despite being slightly below UBS's expectations, was mainly due to a fall in non-trading revenue. Trading revenue, on the other hand, exceeded expectations. Despite these strong figures, the market reacted negatively today, with MCX stock falling approximately 9%. UBS believes this market reaction does not reflect the company's performance accurately.
The third quarter's sequential trading revenue growth of 8% over the second quarter was modest, attributed to a high base in Q2 and seasonal factors that typically result in fewer trading days. However, a bright spot noted by UBS was that software charges came in below UBS's estimates, which should benefit the company's margins moving forward.
Management at MCX is expected to actively work on increasing market participation, which, along with the launch of new products, is anticipated to drive growth in future quarters. UBS views MCX as one of its key midcap picks, signaling confidence in the exchange's prospects. The firm's analysis suggests that the initiatives underway at MCX could fast-track the exchange's growth trajectory and enhance its market position.
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