IPO Revival And Tech Upgrades Will Modernize Equity Listings

Key Takeaways

• Efforts to modernize technology, expand investor access, and integrate globally are driving revenue diversification, efficiency gains, and positioning for sustained growth.
  
• Regulatory progress, new product launches, and educational initiatives are increasing transaction volumes and deepening BMV's relevance for both domestic and international investors.
  
• Structural headwinds from global competition, technology disruption, limited domestic growth, fee pressures, and rising regulatory costs threaten BMV's core revenues and long-term profitability.

Catalysts

Bolsa Mexicana de Valores, S.A.B. de C.V.

• The imminent revival of IPO activity (with one new FIBRA IPO in days and five additional confidential filings, including under the simplified regime) signals an early-stage recovery of the equity listings market, aligning with anticipated long-term growth in retirement savings and institutional capital formation, set to boost listing and trading fee revenue.
  
• Strategic initiatives making BMV's platforms more accessible and attractive to retail investors-such as cutting conversion and market data fees, launching educational campaigns, and rolling out new digital investing tools-are expanding the investor base and driving higher transaction volumes, supporting future revenue and margin growth.
  
• Successful regulatory approval and launch of the fixed income central counterparty (CCP) and eventual extension to repos will accelerate modernization and electronic trading of bonds, facilitating migration of OTC activity onto BMV's platforms and materially increasing clearing and transactional revenue and associated operating efficiencies.
  
• Heavy investment in upgrading technology infrastructure (cloud migration, virtual colocation, front-end replacement, and AI-enabled surveillance/data tools) will underpin new service launches, data monetization, and operational efficiencies, translating into diversified high-margin revenue streams and stronger net operating margins.
  
• Deepening international integration through cross-listings (e.g., S&P/BMV IPC futures on CME, partnerships for data access in U.S. and Europe) is set to increase BMV's global relevance, attract foreign capital, and expand overall trading activity, directly benefitting both top-line and fee income over the long term.

Bolsa Mexicana de Valores. de Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bolsa Mexicana de Valores. de's revenue will grow by 7.7% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 41.0% today to 37.5% in 3 years time.
• Analysts expect earnings to reach MX$2.0 billion (and earnings per share of MX$3.51) by about August 2028, up from MX$1.7 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.9x on those 2028 earnings, up from 12.5x today. This future PE is greater than the current PE for the MX Capital Markets industry at 11.0x.
• Analysts expect the number of shares outstanding to decline by 0.6% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 16.04%, as per the Simply Wall St company report.

Bolsa Mexicana de Valores. de Future Earnings Per Share Growth

Risks

• Increasing globalization and competition from larger, more liquid international exchanges (including OTC venues and dark pools, as well as the continued success of the SIC global market segment) may divert trading activity away from Bolsa Mexicana de Valores, reducing on-exchange volumes and threatening long-term fee revenue growth.
  
• Accelerating technological disruption, such as AI-driven trading, tokenization, and alternative digital asset exchanges, could erode BMV's competitive position if execution on digital initiatives lags, putting net margins and earnings at risk if market participants migrate to more advanced platforms.
  
• Persistently modest growth in investor participation and capital market depth in Mexico (as reflected in capped OTC trading tariff structures and regulation-driven revenue limitations in segments like SIF ICAP) may constrain the long-term expansion of BMV's addressable market, limiting revenue and profit growth prospects.
  
• Continued pressure on trading and market data fees-highlighted by recent and potential further fee reductions to protect market share-risks sustaining downward pressure on core revenues and operating margins, requiring BMV to offset with significant cost controls or new business lines.
  
• Rising compliance costs and regulatory intervention (both domestically and as a result of international coordination, e.g., with U.S. regulators for CCP/clearing reforms) could increase BMV's operating expenses over time, compressing net margins, particularly given its limited pricing power and scale compared to global counterparts.

Valuation

• The analysts have a consensus price target of MX$43.125 for Bolsa Mexicana de Valores. de based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of MX$53.0, and the most bearish reporting a price target of just MX$36.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be MX$5.2 billion, earnings will come to MX$2.0 billion, and it would be trading on a PE ratio of 18.9x, assuming you use a discount rate of 16.0%.
• Given the current share price of MX$38.43, the analyst price target of MX$43.12 is 10.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.