MCX Shares Surge 5% as Jefferies Initiates 'Buy' Rating, Projects Up To 27% Upside

MCX Shares Surge 5% as Jefferies Initiates 'Buy' Rating, Projects Up To 27% Upside​

Multi Commodity Exchange of India (MCX) shares rallied strongly on Wednesday after brokerage firm Jefferies initiated coverage on the stock with a "buy" rating. The firm set a target price of ₹3,600 per share, implying a potential upside of up to 27 percent from Tuesday's closing level.

The stock climbed 5.49 percent, briefly hitting an intraday high of ₹2,993 per share on the NSE. Although it saw some profit booking afterward, MCX closed at ₹2,963 per share, marking a gain of 4.43 percent for the day.

Jefferies Rationale: Near-Monopoly and Future Growth Trajectory​

Jefferies highlighted that penetration in India's commodity derivatives market is expected to increase significantly. The brokerage noted that MCX continues to enjoy a near-monopoly position, particularly within the domain of non-agricultural contracts.

The financial institution projects massive growth in the Indian commodity derivatives space over the next decade. They expect the average daily turnover in commodity futures to grow threefold and the turnover in options markets to grow sixfold.

Projected Revenue and EBITDA Expansion​

Jefferies forecasts that MCX's revenue will expand at a compounded annual rate (CAGR) of 20 percent between Fiscal Year 2026 and FY2029. The company is also expected to see growth in trading activity, with average daily turnover in commodity futures projected to grow at a CAGR of 5 percent and options at 28 percent from the elevated FY2026 base.

The brokerage anticipates strong margin improvements as well. It projects MCX's earnings before interest and tax (EBIT) margin will expand by 260 basis points between FY2026 and FY2029, driven by operating leverage. This leverage is expected to offset technology costs and fees paid to the Securities and Exchange Board of India (SEBI).

Diversification and Untapped Growth Opportunities​

According to Jefferies, MCX holds several avenues for medium-term growth, which could contribute an additional 15 to 20 percent upside to earnings. These opportunities are broad and include participation in the coal exchange and offering colocation services.

The brokerage also pointed out significant areas of future expansion. These encompass the involvement of foreign portfolio investors in non-cash derivatives, introducing weekly options contracts, expanding into battery metals and chemicals products, and increasing retail participation.

Market Penetration Insights and Financial Strength​

Jefferies provided a key insight regarding market penetration, noting that currently only about one-fifth of NSE options traders utilize MCX options. This suggests significant room for increased usage.

Furthermore, the brokerage noted MCX's robust financial fundamentals. The company’s strong cash flows and its net cash position are seen as indicators that could support higher dividend payouts in the future.