Choice Broking has come out with its report on MSTC Ltd. The research firm has recommended to "Subscribe" the IPO in its research report as on March 12, 2019
MSTC is one of the leading PSU engaged in providing e-commerce related services mainly to government entities. Its services include eauction/e-sales, e-procurement services and development of customized software/solutions. As of 31st Dec. 2018, the company has conducted around 0.19mn auctions and has emerged as the preferred service provider for various government entities. MSTC is also the nominated service provider for all the major mineral blocks in states like Assam, Chhattisgarh, Jharkhand, Rajasthan and Uttar Pradesh. The company is also involved into trading activities of various commodities like metallurgical coke, HR coil, naptha, crude oil, coking coal, steam coal, line pipes etc., which caters to customers across steel, oil & gas and power sectors. Through an equal JV company i.e. MMRPL, MSTC has forayed into the recycling sector. • With expanding economic growth leading to a higher requirement of minerals coupled with relatively lower growth in the available resources, there will be higher demand of MSTC services and solutions. We are expecting a higher level of e-auction activities across various minerals. Also, there would be a higher import of critical commodities, thereby positively impacting the traditional business of the company
Valuation and Outlook
On valuation front, at higher price band, the company is demanding a P/S valuation of 0.4x (to its FY18 sales). Moreover based on FY19E and FY20E sales, it is demanding a P/S valuation of 0.3x. Considering the importance and positioning of its services among various government entities, favorable government policies for business growth, stable dividend payout and improvement in the financial performance, the issue seems to be attractively priced. Thus, we assign a “SUBSCRIBE” rating to the issue.
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