Equirus Securities
MSTC (Long)
CMP: ₹98.7
Target: ₹168
MSTC (formerly Metal and Scrap Trading Corporation) is a government-owned Mini Ratna Category-I PSU and one of the leading B2B e-commerce company in India. Incorporated in 1964 as a trading company to deal in the export of scrap, it has grown into a large diversified, multi-product services and trading company. MSTC was a canalising agency for import of ferrous scrap until 1992. After de-canalisation, it has established itself as one of the leading e-commerce service providers in the country and also in trading of bulk raw materials. It has also entered into the recycling business through a 50:50 joint venture with Mahindra Intertrade for setting up a shredding plant and collection centres across the country
We believe 1) MSTC’s revenue model is changing for good and towards low working capital e-commerce from capital intensive trading business; 2) Balance sheet could be leaner as provisions are likely behind; and 3) company could continue to generate healthy cash.
Initiate coverage with ‘long’ rating and target price of ₹168, set at 8x June 2020 trailing twelve months EPS of ₹21.
Risks: Higher provisioning and re-focus on trading business could be key risks to estimates and multiples.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.