MSTCLTD - MSTC Limited Share Price

Management provided a positive outlook for MSTC Limited following a strong performance in Q2 FY26, noting sustained revenue growth supported by the e-commerce segment despite a softening in scrap prices. The anticipated PBT for H1 FY26 stood at Rs.125.79 crores, up from Rs.111.50 crores in H1 FY25, representing a 12.81% increase. PAT also increased to Rs.93.47 crores from Rs.83.48 crores, marking an 11.96% growth.

Key forward-looking points include:

1. MSTC has launched an electronic trading platform for EPR certificates, funded by the Central Pollution Control Board (CPCB), expected to drive revenue as transactions begin.
2. An agreement with the Director General of Foreign Trade (DGFT) to allocate tariff rate quotas for gold bullion imports, indicating potential future volume growth and revenues.
3. Contracts with state governments for e-auctions (e.g., sand mining, liquor shop licenses) are ongoing, signaling enhanced service offerings and long-term revenue streams.
4. MSTC has signed a 30-year agreement with Syama Prasad Mookerjee Port in Kolkata for e-commerce services related to port leasing, reflecting a strategic shift towards long-term agreements and partnerships.
5. Expectations for consistent growth in the coming years driven by new ventures, such as the eUpkaran portal for equipment leasing set to launch in FY27 Q1.

Overall, management believes that diversifying into sectors like software solutions and e-commerce, alongside established revenue streams, will enhance profitability and sustain growth.

Here are the major questions from the Q&A section of the earnings transcript, along with detailed answers in the first person, kept within the character limit:

Question 1: Regarding the vehicle scrapping business, if there are around 10 lakh vehicles for scrapping, what could be their value and MSTC's take rate?

Answer: While it's reported that there are 10 lakh vehicles to be scrapped, actual scrapping requires extensive groundwork. The vehicle details must be in the Vahan Portal, but many are manually recorded. Incentives are necessary for owners to scrap their vehicles, which varies by state. Thus, the process is slow. Although all vehicles need scrapping eventually, substantial hurdles remain.

Question 2: Can you discuss the opportunity related to the EPR trading platform and any recent government regulations?

Answer: The EPR framework involves trading guidelines for various materials, including hazardous waste. The Central Pollution Control Board (CPCB) aims to establish an exchange. We won the contract to create this platform, which is significant for MSTC. Initial costs in developing this platform are high, but we expect revenue to grow post-FY27 as we regulate volumes and transactions for new materials introduced in the future.

Question 3: What's the expected revenue from the MoU with Kolkata Port Trust?

Answer: The MoU with Syama Prasad Mookerjee Port anticipates 5000 crores over 30 years for leasing port land. MSTC will earn a small percentage of this revenue. While we won't see immediate hefty revenues, this long-term partnership will create strategic opportunities for future growth, contrasting our previous short-term contracts.

Question 4: Can you provide insights into the revenue mix from the vehicle scrapping and other segments of e-commerce?

Answer: Our revenue mix consists of percentages and event-based income. The vehicle scrapping business generates about 50% of our revenue, but as scrap prices stabilize, growth is limited. Other sectors, like coal auctions, largely depend on the number of events held. We are continuously optimizing this mix and plan for gradual growth in the next 2-3 years as we expand our business activities.

Question 5: What updates can you share regarding the Telangana government's e-procurement initiative?

Answer: The Telangana government's mandate involves e-auction, e-procurement, and e-sale. We've seen some progress with new additions from their side for auctions. Although e-procurement revenues have been minimal, we expect a growth in events and revenues as we onboard more clients. This is more about facilitating government transactions, and revenue generation may take some time.

Question 6: What is the annual CAPEX requirement, and how do you plan to utilize cash flow?

Answer: Our CAPEX is not overly capital-intensive at this stage. We aim to prioritize IT infrastructure"”current server maintenance being paramount. Second, investments in new ventures, like the CPCB platform, will follow. Lastly, our dividend will be distributed per government guidelines, maintaining a minimum of 30% of PAT or 4% of net worth, whichever is higher.

Feel free to ask if you need further information or additional details!