This Small Cap Stock Grew 28.56% In 1 Month, Brokerage Sees Further 14% Upside In Short Term, Suggests Buy

ICICI Direct has assigned a "Buy" tag on Multi Commodity Exchange of India Limited (MCX) for a 14% potential upside with a target price of Rs 1,700 per share. According to the brokerage, the time period for the potential upside is 12 months with the given target price.

MCX is a leading financial services company in India with a market cap of Rs 7,599.78 crores. It is a small-cap company. MCX is the leader in commodity derivatives exchanges in India with ~96.8% market share in terms of commodity futures turnover. It has ~100% market share in precious metals, base metals and energy. Presence in various commodities offers healthy diversification.

Stock Outlook & Returns

The stock of the company on NSE is trading at Rs 1,500.90 per share at the time of writing. It recorded its 52 week high on 16 November 2021 at Rs 2,021.95 and 52 week low on 16 May 2022 at Rs 1,143, respectively.

The stock has given 13.64% positive returns in the past 1 week, whereas in the past 1 month, it has given 28.56% positive returns on investments. In the 3 months, it has given 7.88% positive returns. However, over a year, the stock fell by 9.38%, giving a negative return. In 3 years, the stock gave 30.74% and in 5 years 40.29% positive returns, respectively.

Q2FY23 Results

According to the ICICI Direct, MCX reported a strong quarter with options gaining strength. Average daily futures turnover (ADTO) declined ~7% YoY to Rs 23918 crore due to a decline in base metals volume. Option ADTO continued to gain traction to Rs 31381 crore; up 60% QoQ. Operational revenue up 17.1% QoQ; other income regained to normal level. Earnings at Rs 63.3 crore; up 52.6%, led by strong options turnover.

What should investors do?

MCX' share price has grown by ~30% over the past three years. Continued anticipated traction in options and regulatory approval for new launches remain key. "We upgrade our estimates for FY23E and FY24E. Being a market leader in commodities exchange and a beneficiary of increase in option volume, we maintain our BUY rating on the stock. We value MCX at ~33x core FY24E EPS and net cash and maintain our target price at Rs 1700," the brokerage has said.

 

Key triggers for future price performance

Continued non-linear growth in option volume to aid revenue & earnings.

Well-diversified product mix, continued improvement in participants to aid volume growth.

New product launch/initiatives - electricity contracts, option gold contract to drive next leg of re-rating.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.