1. Navkar Corporation: Target Rs217
Navkar Corporation Limited is engaged in Container Freight Station (CFS) operations and related activities. The Company is focused on capitalizing the available opportunities in the logistics space in western India.
Its principal products/services that it manufactures/provides include Cargo Handling, Cargo Storage, and Maintenance and Repairs of Containers.
“The installation of six RTGCs at Panvel has increased Navakar’s capacity to over 500,000 TEUs. We expect profitability to register a 35% CAGR over FY17-19 largely on account of volume ramp-up at Vapi,” said Sedani.
“With capex to be fully completed in FY18, and revenue from expanded operations to kick in gradually in FY18 (and fully in FY19), the company is set to report a leap in revenue and profitability,” he said.
Sedani further added that rail operations at Vapi are expected to commence soon which will lead to greater utilisation. We value the stock at a P/E of 20x FY19e, lower than the multiple commanded by the sector leader.
2. TCI Express: BUY| Target Rs660
Indian organized logistic market is miniature with only a handful of large organized players but the logistics sector was among most underperforming sector for last three years despite most awaiting GST bill came into play.
TCI Express is a market leader, in value terms, in the Indian express delivery market. With a fleet of over 4000 (contracted) containerised vehicles and about 550 own branches, TCI serves over 40,000 locations.
“TCI Express is a leading company with low debt in its book as it is asset light company and after this move by the government, it will be able to explore opportunity using the low cost of debt. If we compare stock price movement then it also outperformed its peers in last one year,” Santosh Meena, Sr Research Analyst, Swastika Investmart told Moneycontrol.
The company adopts a unique hub-and-spoke model fulfilling 2,500 feeder routes through its 400 express routes and 28 sorting centres. TCI scheduled cargo pick-up service from over 3000 points enables it to offer definite express delivery solutions to its customers.
“We believe TCI, with its leadership position, would be the most preferred third-party logistics (3PL) player. TCIEL has charted an aggressive growth strategy and intends to make a capex spend of Rs300 crore over the next four or five years,” ICICIdirect said in a report.
“Majority of the asset allocation (50%) is towards increasing its handling capacity of sorting centres (current capacity utilisation at 85%),” it said. The domestic brokerage firm values TCI at 30x P/E on an estimated EPS of Rs22/share (FY20E) with a target price of Rs660.
3. GATI: BUY| Target Rs155
FCCB issue led to a dilution of promoter’s stake to the extent of 7.3 percent. Post this, the revised promoter holding is now at 29.8%. “The resultant impact of the same could now lead Gati to bring in a strategic investor/partner, raise funds for future expansion or demerge its business into separate entities (like TCI),” it said.
The domestic brokerage firm is of the view that the strategy may lead to a multiple re-rating due to which we maintain our BUY rating on the stock with a revised target price of Rs155.
4. VRL Logistics: BUY| Target Rs422
VRL Logistics 2QFY18 results were largely in line with estimates with revenue at Rs4.5bn (up 0.4% YoY), EBITDA margins at 12.3% vs. 11.1% YoY & PAT at Rs216m (up 55.8%YoY).
Dolat Capital maintains an Accumulate rating with a target of Rs422.
“The buyback of share adds value to the shareholders. We expect the company to clock revenue growth of 4-7 percent YoY. At current price, it is trading at P/E 27.7x FY19E and EV/EBITDA 13.3x FY19,” said the report.
5. Allcargo Logistics: BUY| Target Rs190
Allcargo Logistics (AGLL) reported subdued results in 2QFY18. Topline growth was 10 percent YoY primarily led by 15 percent YoY growth in MTO segment, while CFS/P&E segment reported a decline of 10%/29 percent YoY.
“Despite lower operating profit PAT was flattish YoY at INR638mn on lower depreciation and taxes. We have trimmed our estimates to reflect lower profitability assumption. We lower our Mar-18 target to Rs190 (earlier Rs195) based on 15x FY19e EPS,” Antique Stock Broking Limited said in a report.
“The management is actively looking for opportunities in contract logistics business and expects full benefits of GST rollout to be visible in the 1-year time frame,” it said. While MTO segment remains strong, revival in CFS volumes, a pick-up in overall domestic order execution cycle and sustained higher asset utilisation, will add to growth of Indian businesses of CFS and P&E respectively.
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