Neutral MCX Ltd for the Target Rs.8,300 by Motilal Oswal Financial Services Ltd
Best-ever quarterly performance
* MCX posted a 59% YoY growth in operating revenue, reaching the bestever quarterly revenue of INR3.7b (in-line), backed by volume growth of 77% YoY.
* Total expenses rose 29% YoY to INR1.3b, driven by 40%/25% YoY increase in other expenses and staff costs. EBITDA stood at INR2.4b (+82% YoY) in 1QFY26, reflecting an EBITDA margin of 64.8% vs 56.6% in 1QFY25.
* Strong revenue growth, coupled with a 73% YoY growth in other income, resulted in 83% YoY growth in PAT to INR2b (in line).
* While maintaining operational efficiency remains a key focus area for MCX, EBITDA margin is expected to remain under pressure in the near term, owing to weak volume trends and continued investments in tech and personnel.
* We have cut our EPS estimates for FY26/27 by 4%/7%, factoring in higher employee costs, slowdown in futures volumes, and lower premium to the notional turnover ratio. We reiterate a Neutral rating on the stock with a one-year TP of INR8,300 (premised on 42x FY27E EPS).
Volumes achieve all-time high
* The transaction fee for 1QFY26 stood at ~INR3.4b, up 68% YoY, comprising options and futures in the ratio of 68:32 (vs. 1QFY24 at INR2b in the ratio of 63:37).
* Options ADT surged 70% YoY to INR2.7t, largely supported by 379% YoY growth in bullion contracts and 31% YoY growth in energy contracts. Futures ADT rose 56% YoY to INR405b, fueled by 77%/7% YoY growth in bullion/base metals, while energy futures volumes declined 2% YoY.
* Other income stood at INR326m, growing 73% YoY (10% beat).
* Staff cost grew 40% YoY to INR448m (18% above est.). Other expenses grew 24% YoY to INR867m (9% below est.) with lower-than-expected tech cost at INR239m (+6% YoY) offset by higher-than-expected SGF contribution and regulatory charges at INR268m (+30% YoY).
* Client participation increased 23% YoY, with traded clients at 0.7m— 0.57m in options and 0.25m in futures—reflecting growth across all participant categories.
* The number of UCCs at the end of 1QFY26 stood at 34.7m compared to 26m in 1QFY25 and 25m in 4QFY25.
Key takeaways from the management commentary
* The product pipeline remains strong across metals, agri, and bullion contracts. The exchange is currently awaiting regulatory approvals, after which product launches will proceed according to the internal timeline.
* Commercial interest in electricity futures is growing, with private generators and corporates (with 30-40% power cost exposure) contributing ~50% of the electricity futures volume. Currently, the focus is on increasing traction from this segment, while participation from other investor segments is expected to increase over time
* Employee cost continues to see growth due to annual increments, headcount expansion, and apportionment of variable pay. The run rate is expected to be consistent in the subsequent quarters as well.
Valuation and view
* We expect MCX to register a revenue/EBITDA/PAT CAGR of 30%/36%/34% over FY25-27E. MCX’s key growth drivers include: 1) new product launches—futures and options; 2) continued volatility in key commodity prices (gold, crude oil, and natural gas) amid global uncertainties; and 3) sustained growth momentum in retail participation in the options market.
* We have cut our EPS estimates for FY26/27 by 4%/7%, factoring in higher employee costs, slowdown in futures volumes, and lower premium to the notional turnover ratio. We reiterate a Neutral rating on the stock with a oneyear TP of INR8,300 (premised on 42x FY27E EPS).
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