Morgan Stanley has downgraded Multi Commodity Exchange of India (MCX) stock to ‘underweight’ and slashed its target price to ₹3,715, implying a potential downside of 38% from its current market price of ₹5,989.40. The brokerage has expressed concerns over stagnation in revenue growth and concentration risks that could impact the company’s valuation.
Key highlights:
- Profitability Miss:
- Core EBITDA met expectations; however, a higher contribution to the Settlement Guarantee Fund (SGF) led to a miss in profit after tax (PAT).
- Stagnating Revenue Trends:
- MCX has witnessed a moderation in average daily revenue (ADR) in recent months. If this trend continues, it could lead to meaningful downgrades in consensus revenue and earnings estimates.
- Valuation Risks:
- Morgan Stanley believes the stock’s current valuation is stretched, given low confidence in the sustainability of revenue growth. The heavy reliance on concentrated revenue streams heightens risks.
- De-rating Likely:
- Sustained stagnation in ADR and earnings could trigger a significant de-rating of the stock.
Outlook:
Morgan Stanley has flagged low conviction in MCX’s growth sustainability and highlighted significant revenue concentration risks. The brokerage warns that further pressure on operational metrics could weigh heavily on the stock’s valuation.
CMP and Target:
- Current Market Price (CMP): ₹5,989.40
- Target Price (TP): ₹3,715
- Downside Potential: 38%
Investors are advised to track ADR trends closely as the brokerage sees stagnation as a key risk to future performance.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should consult their financial advisors before making investment decisions.
