🐂 Not all bull runs are created equal. November’s AI picks include 5 stocks up +20% eachUnlock Stocks

Investec flags valuation risks for MCX stock as revenue and EPS projections rise

EditorEmilio Ghigini
Published 22/10/2024, 08:18
MCEI
-

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.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.