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Weak revenue led to a 5% PAT miss; cost broadly in line

* MCX reported PAT of INR878m, 5% lower than our estimates of INR923m. Total revenue came in at INR1.8b, up 35% YoY (~13.4% miss). The miss was due to lower non-transaction revenues and lower-than-expected premium to notional turnover in the options segment.

* Overall volumes improved significantly, rising by 97% YoY to INR83t. Futures volumes came in at INR11.1t, down 15% YoY and 16% QoQ. Option volumes jumped 148% YoY and 18% QoQ to INR71.6t.

* For FY24, revenue increased 33% YoY to INR 6.8b and PAT declined 44% YoY to INR831m.

* We have raised our FY25 and FY26 EPS estimates to factor in a stronger volume trajectory and anticipated new product launches. We reiterate our BUY rating with a one-year TP of INR4,400 (premised on 38x FY26E EPS).

Energy and bullion drive overall volume growth

* Volumes in the Energy segment jumped 121% YoY, fueled by a 127% YoY surge in crude oil volumes in 4QFY24. ? Bullion volumes rose 56% YoY, driven by 69%/42% YoY rise in gold/silver volumes.

* Overall base metal volumes dropped 53% YoY, due to a 60% YoY decline in each Aluminum/Copper volumes in 4QFY24.

* Futures volumes came in at INR11t, down 15% YoY/16% QoQ. Options volumes surged 148% YoY/18% QoQ to INR71.6t.

* Overall volumes improved 97% YoY to INR83t. Total revenue for 4QFY24 grew 35% YoY to INR1.81b (~13.4% miss), mainly led by non-transaction revenues

* Staff costs increased 31% YoY to INR307m (in line). Software expenses stood at INR233m, down 73% YoY (in line) and 84% QoQ.

* Other income declined 9% YoY but grew 3% QoQ to INR183m (broadly in line with our expectations).

Key takeaways from the management commentary

* The launch of new products is still work in progress. MCX has approval for 10g gold futures monthly contracts. Currently, 10g gold monthly contract is in the testing phase.

* The run rate of total operating technology cost (including AMC cost to TCS) and depreciation shall be in range of INR600m. Going forward, costs will no longer be linked to volumes, resulting in relatively stable costs going forward.

* When volatility is higher, maximum trades happen in long-dated contracts, which carry lower premium realization, leading to a decline in the premiumto-notional turnover ratio.

Valuation and view - Maintain BUY

We expect MCX to deliver a CAGR of 27%/231%/166% in revenue/EBITDA/PAT over FY24-26, led by a 53% CAGR in options volumes. We highlight several near- to medium-term drivers of volume growth: 1) new product launches – futures & options (short-duration contracts); 2) continued volatility in key commodity prices (gold, crude oil & natural gas) amid global uncertainties; and 3) a rise in retail participation in the options market. Additionally, the company has launched direct market access for Category II FPIs, which would drive volumes in the medium term. We expect no impact from competition on MCX's volumes, as similar products are currently available on other exchanges. With the technology overhang behind MCX and near-term potential drivers in place, we see meaningful re-rating potential. We maintain our BUY rating with a TP of INR4,400 (based on 38x FY26E EPS).

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