Do you guys know anything about recent selling?, is it because of this above disinvestment?
There are NOT a lot of positive catalyst going for MSTC in short term from my perspective right now but can list many on the negative side.
- E-commerce: Management has failed to articulate where the growth will come from given the headwinds of Coal India business going away, private sector revenue growth will take time, gestation of new initiatives will take time (e.g. recycling of other electronic items, etc)
- Vehicle scrappage - market was pricing this to happen much sooner than even management was expecting. Mgmt kept on reiterating that this will take time given infrastructure is not set up. Even when it kicks off, this space will be highly competitve both from JV with Mahindra as well as listing of scappage vehicles is concerned
- High growth from the divested FSNL business kept MSTC’s numbers look attractive on a consolidated basis than they were in the last 2 earnings updates.
- You now had a business trading at mid 20s PE, with almost no growth in the near term and no great articulation from management from a vision perspective.
I have attached my write-up from early this year incase helpful
MSTC Limited _Ex…pdf (245.9 KB)
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While I’m not a valuation expert, my rough estimates suggest that with a projected PAT of ₹160 crore for FY25 (₹40 crore in Q1), and applying multiples of 10-15 along with cash reserves of ₹1400 crore, the market capitalization would be in the range of ₹3000-₹3800 crore.
The current Mcap is 4800 cr with PE of 22. It might correct some more from these levels (not a expert!). Feedback welcome!
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Current vehicle scappage policy is not without flaws…Cars to be Scrapped Based on Pollution Levels Not Age
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I took out this year`s scrapping data for CY24, forget about MSTC share but the total vehicles which have come for scrapping to all the 120 facilities all India (Certificate of Deposit) is 31K, whereas MSTC would have a share of around 8K so 35%
too low for any meaningful business profit.
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just see the actual data of vehicles scrapped, it comes to 8K vehicles this year, so your assumption of 0.7M vehicles needs to be revisited
This research is as of March this year when Mgmt expected scrapping of old vehicles to pick up post election. I clearly overestimated this helped by mgmt bullish views after I spoke to them.
Just FYI, the 0.7m is for FY 2026, still probably optimistic number but just incase.
Also, I do not plan to update these numbers until MSTC declines substantially to me margin of safety. If and when I do, happy to share on this forum.
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cool, makes sense. I invested into this, around 300-350; that had a great margin of safety
also, I feel the E-commerce business is totally unpredictable, as it is at the mercy of Govt announcing divestification or spectrum sale kind of intiatives, hence a PE of 15, is a little high.
MSTC ideally should be a good PSU bet which is guranted to work over next 5 years and pays a heafty dividend
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Mind you, post divestment MSTC margins and return metrics are really attractive. Question is the direction and growth of the company.
Question - Are you still holding? If yes and you think 15x PE is too high, why not sell given where it is trading versus ride it all the way to the bottom?
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I did some profit booking at 900-920 region; purely looking at the high PE.
and you are right, FSNL divestment should give a good exceptioanlly high dividend- it is attractive on that basis as of now.
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FSNL Highlights
FSNL has a networth of around 257 crores against which MSTC has realized Rs.320 crores.
Realization was assumed on higher side seeing the growth in last 3-4 quarters.
2. Coal India has started itz own platform as they are aware of their major customers. Major clients of MSTC seems to scrap dealers and PSU which is allowing them to fetch 40% of revenue. To have huge numbers of scrap dealers at various locations in India for online auctions seems to be MOAT for MSTC which i believe.
3. Vehicle Scrappage Policy is taking his own time to get implemented but it will be implemented in next 2-3 years .Till that time if MSTC is able to cater Government vehicles all over India, it should also reasonable topline to MSTC. On monthly basis the numbers are increase of vehicle scrappage.
4. Extract from transcript “So that is the organic growth of, finding more clients or finding more entities, who are into e-commerce of the kind of things that we already are doing. And apart from this, we have also been working at integrating services. So that is a separate line of business, which would be a somewhat inorganic growth, which would build upon what we are doing and are developing more upstream or downstream activities. So that’s two ways that one thinks of growing, which is what MSTC has also been.”
“It should start happening. The revenue stream should start happening from new initiatives in Q3 I mean, things that we are working on at this point of time, So Q3,Q4 onwards, there should be significant.” (extract of Transcript June 24)
“We have also embarked on a very ambitious plan for building and enhancing capacity in terms of domain expertise, both in terms of manpower and in technology. We are quite confident that this approach shall show tangible results, tangible benefits, in Q3, Q4 of FY 25.” (extract of Transcript March 24)
As per the commentary of Management ,Q3 /Q4 should be the period where some new business should materialize and sale of FSNL in Q2 seems to be that direction. It enables to have cash in the books for future opportunities.
New India Assurance Limited seems to selling spree in last many quarters and major sell off in last quarter may be from his end. Shareholding patters for Sept 24 will be key to watch.
Another Selling shareholder is Quant Mutual Fund in Aug 24 month which has been acquired in June 2024.
“I am just Eagerly waiting for Walk the Talk by CMD…”
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Thanks mate. I had started building quantity & sold it. Twice. As both the times, I wasn’t sure of value, as growth is lumpy & the stock had run up much ahead of fundamentals was what I thought. Also, the second time Coal India business went away. Not sure if we can model this business with much confidence even though it has come down significantly. Because we can’t forecast EPS over the next 2-3 years with much confidence, it becomes useless to look at TTM PE. No doubt the opportunity is huge but even the competition is coming quicker & exponentially. Management talks on too many things too vaguely. Sometimes they talk about inorganic growth without much clarity, sometimes they talk about datacentre business without any focus. A platform business, e-commerce, great balance sheet, cash rich. But how to look at future growth is the question & depending on that how to value?
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