Can MCX Touch 4000 Mark?

Can we say that MCX is worthy of every portfolio? Please go through the writeup to draw the requisite conclusion.

Multi Commodity Exchange of India (MCX) is India's first listed, national-level, electronic exchange. It is also the first exchange to introduce commodity options in India. It offers commodity futures contracts in bullion, base metal, energy, and agricultural commodities, whereas commodity futures with both Agricultural and non-agricultural products like Cotton, Rapeseed Oil, Seed & Meal, Sugar, Flat Glass, Methanol, Pure Teraphthelic Acid (PTA) and Thermal Coal as underlying's are traded on ZCE. Besides ZCE offers option products on White Sugar and Cotton. While, options on Gold, Silver, Crude Oil, Copper, and Zinc futures are traded on MCX.

FINANCIALS:

9mFY20

Revenue. 368

PAT. 170

Equity. 50.99

EPS Rs 33.61

9m PAT is more than PAT of entire FY19
FY20 EPS can be 51-52

FY21 EPS should be Rs 60-65

CASH IN HAND APPROX 300/SHARE WHICH WILL CONTINUE TO GROW EACH YEAR

At the current market price of Rs. 1328, MCX Ltd. is trading at PE ratio of 26xFY20Eeps and forward PE Ratio ( FY21) is just somewhere around 20 when it should command a PE ratio of at least 35-40 keeping in view the fact that it commands more than 90% share of Indian commodity trading market. Its Mkt Cap is Rs. 6500 cr when NSE (Biggest stock exchange) is going to have a Market Cap of more than Rs. 50000-60000 cr whenever NSE gets listed ( some block deals were concluded at 50000 cr Valuation as some institutions sold their holding). For a perspective, Commodity markets are much bigger than Equity across the globe. _In the USA, commodity tdg turnover is about 6 times more than Equity turnover. In China, the figure is 2 times but in India, commodity turnover is just 1/10th of the equity market.  This means that there is huge scope for tremendous growth for commodity trading and MCX in India.

No pricing concern. Assured margin. NP will continue to rise disproportionately higher than revenue as MCX in the service industry

TARGET PRICE: CAN BE 4000 IN 3 YEARS

Not to look at regular price gyrations and advice to hold for 3-10 years

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