1QFY2017 Result Update | Logistics
September 8, 2016
Navkar Corporation
BUY
CMP
`192
Performance Update
Target Price
`265
Y/E March (` cr)
1QFY17
1QFY17
% yoy
4QFY16
% qoq
Investment Period
12 Months
Net sales
90
82
9.9
91
(1.3)
EBITDA
38
37
2.2
38
0.1
Stock Info
EBITDA margin (%)
42.4
45.6
(318bp)
41.9
56bp
Adjusted PAT
24
17
40.9
26
(8.9)
Sector
Logistics
Source: Company, Angel Research
Market Cap (` cr)
2,735
Navkar Corporation (NCL) reported a good set of numbers for 1QFY2017. The
Net Debt
161
consolidated top-line grew by ~10% yoy while on the operating front, the
Beta
0.6
company reported a margin contraction on account of higher employee and
52 Week High / Low
224 / 151
other operating expenses. The net profit grew by ~41% yoy due to lower interest
Avg. Daily Volume
17,751
cost and higher other income.
Face Value (`)
10
Top-line grew ~10% yoy: The consolidated top-line grew by ~10% yoy to ~`90cr
BSE Sensex
28,978
led by higher volumes. NCL’s container volume handled stood at 81,866 TEUs
Nifty
8,943
(twenty-foot equivalent units) in 1QFY2017. However, growth in revenue was
Reuters Code
NA
lower than volume growth, which rose by 15% yoy, primarily due to 6% yoy
Bloomberg Code
NACO@IN
decline in realization to `10,748/TEU on account of higher share of empty
cargoes at 5,300 containers vis-à-vis 1,200 in 4QFY2016.
Shareholding Pattern (%)
PAT grew ~41% yoy: On the operating front, the company reported a margin
Promoters
72.9
contraction of 318bp yoy to 42.4% on account of higher employee (up 103bp
MF / Banks / Indian Fls
15.1
yoy) and other operating expenses (up 215bp yoy) as a percentage of sales. As a
FII / NRIs / OCBs
7.8
result, the EBITDA grew by ~2% yoy to `38cr. However, net profit grew by 41%
Indian Public / Others
4.3
on back of higher other income and lower interest cost.
Outlook and Valuation: We estimate NCL to post a revenue CAGR of 32.7% and
PAT CAGR of 31.3% over FY2016-18E. We have factored in lower utilization
Abs. (%)
3m 1yr 3yr
levels of 34.7% and 42.6% for FY2017E and FY2018E, respectively. At the current
Sensex
6.3
12.1
51.1
levels, the stock is trading at 16.7x its FY2018E earnings. Historically, NCL has
NCL
(0.6)
NA NA
consistently grown at JNPT and increased its utilisation from 68% in FY2012 to
87% in FY2015 by leveraging on its rail advantage during periods when JNPT
Historical share price chart
posted flattish volume growth. Going forward, we expect NCL’s utilizations to
250
improve; we expect the company to be able to garner a good chunk of business
200
over the next three to four years due to its rail advantage at both JNPT and Vapi.
We maintain our Buy recommendation on the stock with a target price of `265.
150
Key Financials
100
Y/E March (` cr)
FY2014
FY2015
FY2016
FY2017E FY2018E
50
Net sales
349
329
347
408
612
0
% chg
4.8
(5.9)
5.6
17.6
49.7
Adj. Net profit
90
68
95
97
164
% chg
58.7
(24.0)
39.0
1.5
69.8
EBITDA margin (%)
35.5
40.7
43.2
42.9
42.3
Source: Company, Angel Research
EPS (`)
6.3
4.8
6.7
6.8
11.5
P/E (x)
30.4
40.0
28.8
28.3
16.7
P/BV (x)
6.4
3.7
2.1
2.0
1.8
RoE (%)
21.0
9.1
7.3
6.9
10.5
RoCE (%)
12.8
9.1
7.5
8.1
11.6
Amarjeet S Maurya
EV/Sales (x)
9.0
10.0
8.3
7.6
5.1
022-40003600 Ext: 6831
EV/EBITDA (x)
25.4
24.6
19.3
17.7
12.0
Source: Company, Angel Research; Note: CMP as of September 6, 2016
Please refer to important disclosures at the end of this report
1
Navkar Corporation | 1QFY2017 Result Update
Exhibit 1: 4QFY2016 Performance
Y/E March (` cr)
1QFY17
1QFY17
% yoy
4QFY16
% qoq
FY2016
FY2015
% chg
Net Sales
90
82
9.9
91
(1.3)
347
329
5.6
Staff Costs
7
6
26.4
6
11.5
25
22
11.4
(% of Sales)
7.9
6.9
103
7.0
90
7.1
6.8
37
Other Expenses
45
39
14.8
47
(4.1)
172
173
(0.1)
(% of Sales)
49.6
47.5
215
51.1
(146)
49.7
52.5
(287)
Total Expenditure
52
45
16.3
53
(2.2)
197
195
1.2
Operating Profit
38
37
2.2
38
0.1
150
134
12.1
OPM
42.4
45.6
41.9
43.2
40.7
Interest
11
17
(33.2)
7
61.9
40
41
(2.5)
Depreciation
5
5
7.9
5
7.6
19
15
27.0
Other Income
4
3
69.2
7
(34.4)
23
2
977.6
PBT (excl. Ext Items)
26
19
41.8
33
(20.7)
114
80
42.6
Ext (Income)/Expense
-
-
-
-
-
PBT (incl. Ext Items)
26
19
41.8
33
(20.7)
114
80
42.6
(% of Sales)
29.1
22.5
36.2
32.9
24.4
Provision for Taxation
3
2
7
19
12
64.1
(% of PBT)
10.4
9.8
22.1
16.7
14.6
Reported PAT
24
17
40.9
26
(8.9)
95
68
39.0
PATM
26.1
20.3
28.2
27.4
20.8
Minority Interest After NP
-
-
-
-
-
-
-
-
Extra-ordinary Items
-
-
-
-
-
-
-
-
Reported PAT
23.5
16.69
40.9
25.8
(8.9)
95.1
68.4
39.0
PATM
26.1
20.3
28.2
27.4
20.8
Source: Company, Angel Research
September 8, 2016
2
Navkar Corporation | 1QFY2017 Result Update
Investment Arguments
Upcoming ICD to provide an edge
The Vapi region has a huge potential as it is a well developed industrial area. As
per the Management and industry sources, the Vapi region accounts for close to
27% of container volumes at JNPT. We believe that the company’s inland
container depot (ICD; with rail connectivity) at Vapi will enable NCL to garner a
good portion of the business from the region. At present, imports headed for the
region have to get custom cleared at container freight station (CFS)/ICD at JNPT
and are then transported via road. With rail transport being a more economical
option compared to road, the imports should head directly to Vapi ICD. As for exports
from Vapi region, a large portion (~60%) is stuffed at factory and transported to JNPT.
However, the balance 40% or ~170,000 TEUs (less-than-container load [LCL]) which
are being transported via road and consolidated at JNPT, can be consolidated at the
ICD. Once the scale advantages kick in, and given the rail advantage, the company
can also cater to some portion of bulkier factory stuffed cargo.
Capacity enhancement at Somathane to aid revenue growth
The company has managed to outgrow its peers in the region by attracting
volumes on the back of its rail advantage. NCL has been facing capacity
constraints at JNPT and is forced to reject certain bulk commodities like PTA, Fiber,
Scrap, Marble, etc. Although the current South Gujarat volume of NCL (~70,000
TEUs) is expected to shift to the Vapi ICD, the company will now be able to handle
these bulk commodities and effectively utilize its extended capacity. NCL will now
also be handling domestic traffic, which it had been rejecting earlier, thus aiding
growth.
Logistics park at Vapi to be an additional revenue driver
The logistics park will be a one-stop solution for importers and exporters, providing
a host of warehousing and other value added services. Its close proximity to one of
the largest industrial clusters in India augurs well for NCL.
September 8, 2016
3
Navkar Corporation | 1QFY2017 Result Update
Outlook and Valuation
We estimate NCL to post a revenue CAGR of 32.7% and PAT CAGR of 31.3% over
FY2016-18E. We have factored in lower utilization levels of 34.7% and 42.6% for
FY2017E and FY2018E, respectively. At the current levels, the stock is trading at
16.7x its FY2018E earnings. Historically, Navkar has consistently grown at JNPT
and increased its utilisation from 68% in FY2012 to 87% in FY2015 by leveraging
on its rail advantage during periods when JNPT posted flattish volume growth.
Going forward, we expect NCL’s utilizations to improve; we expect the company to
be able to garner a good chunk of business over the next three to four years due
to its rail advantage at both JNPT and Vapi. We maintain our Buy
recommendation on the stock with a target price of `265.
Downside risks to our estimates include
The company is exposed to currency risk with foreign currency debt of `194cr
on its balance sheet (as of 31-03-2015). The company uses dollar call options
to hedge against dollar appreciation and as per the term, the foreign currency
debt will get converted to INR debt upon dollar rate hitting the strike price. In
this event, the interest rate on the INR debt will be at ~12%.
Currently the company is paying lower taxes, with it getting tax benefits for its
CFS operations. Once the exemption period is over, the company will have to
pay higher taxes, which could impact its earnings growth.
Delay in capacity expansion and lower than expected utilization of existing
CFS as well as existing players increasing their capacity at JNPT could impact
the profitability of the company. Delay in capacity enhancement at JNPT can
also impact the top-line.
The company operates a private freight terminal (PFT) at JNPT which has
helped the company in increasing its volumes. Lapse in agreement with the
Indian Railways will lead to the company being unable to operate its PFT.
September 8, 2016
4
Navkar Corporation | 1QFY2017 Result Update
Company Background
NCL is a CFS operator with three CFSs, Ajivali CFS I and Ajivali CFS II at Ajivali
and one at Somathane. All of its CFS units are strategically located in close
proximity to JNPT which is the largest container port in India. As of May 31, 2015,
NCL’s CFSs had an aggregate installed handling capacity of 310,000 TEUs per
annum. It has a PFT which facilitates loading and unloading of cargo from
container trains operating between Somathane CFS and JNPT and to transport
domestic cargo to and from inland destinations on the Indian rail network. As of
May 31, 2015, it also owns and operates 516 trailers for the transportation of
cargo between its CFSs and the JN Port by road. The company offers services like
cargo storage facilities at CFSs, packing, labeling/bar-coding, palletizing,
fumigation and other related activities. It also provides warehousing facilities, for
which, it occupies an aggregate area of 500,000 sq ft.
Exhibit 2: CFS details
Particulars
Ajivali CFS I
Ajivali CFS II
Somathane CFS
Somathane/Ashte
Location
Ajivali village, Panvel Ajivali village, Panvel
village, Panvel
Area Custom Notified
135,156 sq. ft.
428,400 sq. ft.
1,073,224.35 sq. ft.
Operational since
May 12, 2008
May 18, 2006
May 11, 2009
Installed Capacity per
25,000 TEUs
65,000 TEUs
220,000 TEUs
annum
Bonded warehouse
-
27,641 sq. feet
33,141 sq. feet
Reefer Points
16
24
52
Temperature controlled
-
500 m
-
chambers
Authorized to handle,
Authorized to handle,
store and deliver
store and deliver
Hazardous cargo
-
hazardous cargo up to
hazardous cargo, up
the total installed
to the total installed
capacity per annum capacity per annum
Connectivity
Road
Road
Rail and road
Source: Company, Angel Research
September 8, 2016
5
Navkar Corporation | 1QFY2017 Result Update
Consolidated Profit & Loss Statement
Y/E March (` cr)
FY2014
FY2015
FY2016
FY2017E
FY2018E
Total operating income
349
329
347
408
612
% chg
4.8
(5.9)
5.6
17.6
49.7
Total Expenditure
225
195
197
233
353
Operating Expenses
117
138
144
170
256
Purchases of Traded Goods
60
-
-
-
-
Personnel Expenses
19
22
25
31
48
Others Expenses
29
34
29
33
49
EBITDA
124
134
150
175
259
% chg
21.9
7.9
12.2
16.7
47.6
(% of Net Sales)
35.5
40.7
43.2
42.9
42.3
Depreciation& Amortisation
13
15
19
26
29
EBIT
111
119
131
149
229
% chg
21.3
6.8
10.2
13.8
54.2
(% of Net Sales)
31.8
36.1
37.7
36.4
37.5
Interest & other Charges
33
26
23
40
41
Other Income
4
2
23
5
5
(% of PBT)
4.7
2.3
17.7
4.4
2.6
Share in profit of Associates
-
-
-
-
-
Recurring PBT
82
94
131
114
193
% chg
28.4
15.3
38.6
(13.1)
69.8
Prior Period & Extraord.
-
-
-
-
-
Exp./(Inc.)
PBT (reported)
82
94
131
114
193
Tax
9
12
19
17
29
(% of PBT)
10.8
12.4
14.6
15.0
15.0
PAT (reported)
73
83
112
97
164
Extraordinary Items
17
(14)
(17)
-
-
ADJ. PAT
90
68
95
97
164
% chg
58.7
(24.0)
39.0
1.5
69.8
(% of Net Sales)
25.8
20.8
27.4
23.6
26.8
Basic EPS (`)
6.3
4.8
6.7
6.8
11.5
Fully Diluted EPS (`)
6.3
4.8
6.7
6.8
11.5
% chg
58.7
(24.0)
39.0
1.5
69.8
September 8, 2016
6
Navkar Corporation | 1QFY2017 Result Update
Consolidated Balance Sheet
Y/E March (` cr)
FY2014
FY2015
FY2016
FY2017E FY2018E
SOURCES OF FUNDS
Equity Share Capital
21
112
145
145
145
Reserves& Surplus
407
638
1,153
1,250
1,414
Shareholders’ Funds
428
750
1,298
1,395
1,559
Minority Interest
-
-
-
-
-
Total Loans
437
555
452
440
420
Deferred Tax Liability
28
33
33
33
33
Total Liabilities
893
1,338
1,783
1,868
2,012
APPLICATION OF FUNDS
Gross Block
699
1,133
1,256
1,529
1,549
Less: Acc. Depreciation
43
59
79
105
134
Net Block
656
1,073
1,177
1,424
1,415
Capital Work-in-Progress
44
27
27
27
27
Investments
20
5
-
-
-
Current Assets
198
253
603
442
610
Inventories
-
2
2
2
3
Sundry Debtors
76
77
83
97
146
Cash
1
1
290
69
52
Loans & Advances
45
48
52
69
104
Other Assets
76
126
175
204
306
Current liabilities
25
22
25
26
42
Net Current Assets
172
231
577
416
569
Deferred Tax Asset
1
1
1
1
1
Mis. Exp. not written off
-
-
-
-
-
Total Assets
893
1,338
1,783
1,868
2,012
September 8, 2016
7
Navkar Corporation | 1QFY2017 Result Update
Consolidated Cashflow Statement
Y/E March (` cr)
FY2014
FY2015
FY2016
FY2017E FY2018E
Profit before tax
99
80
131
114
193
Depreciation
13
15
19
26
29
Change in Working Capital
(29)
7
(56)
(60)
(170)
Interest / Dividend (Net)
33
26
23
40
41
Direct taxes paid
(16)
(22)
(19)
(17)
(29)
Others
(17)
18
-
-
-
Cash Flow from Operations
82
123
98
103
64
(Inc.)/ Dec. in Fixed Assets
(93)
(209)
(123)
(273)
(20)
(Inc.)/ Dec. in Investments
-
15
5
-
-
Cash Flow from Investing
(93)
(194)
(118)
(273)
(20)
Issue of Equity
35
-
453
-
-
Inc./(Dec.) in loans
10
97
(103)
(12)
(20)
Dividend Paid (Incl. Tax)
-
-
-
-
-
Interest / Dividend (Net)
1
(27)
413
(40)
(41)
Cash Flow from Financing
10
71
310
(52)
(61)
Inc./(Dec.) in Cash
(1)
0
289
(222)
(17)
Opening Cash balances
2
1
1
290
69
Closing Cash balances
1
1
290
69
52
September 8, 2016
8
Navkar Corporation | 1QFY2017 Result Update
Key Ratios
Y/E March
FY2014
FY2015
FY2016
FY2017E FY2018E
Valuation Ratio (x)
P/E (on FDEPS)
30.4
40.0
28.8
28.3
16.7
P/CEPS
31.8
28.0
20.9
22.3
14.2
P/BV
6.4
3.7
2.1
2.0
1.8
Dividend yield (%)
0.0
0.0
0.0
0.0
0.0
EV/Sales
9.0
10.0
8.3
7.6
5.1
EV/EBITDA
25.4
24.6
19.3
17.7
12.0
EV / Total Assets
3.4
2.4
1.6
1.6
1.5
Per Share Data (`)
EPS (Basic)
6.3
4.8
6.7
6.8
11.5
EPS (fully diluted)
6.3
4.8
6.7
6.8
11.5
Cash EPS
6.0
6.9
9.2
8.6
13.6
DPS
0.0
0.0
0.0
0.0
0.0
Book Value
30.0
52.6
91.0
97.8
109.3
Returns (%)
ROCE
12.8
9.1
7.5
8.1
11.6
Angel ROIC (Pre-tax)
13.2
9.1
9.0
8.4
11.9
ROE
21.0
9.1
7.3
6.9
10.5
Turnover ratios (x)
Asset Turnover (Gross Block)
0.5
0.3
0.3
0.3
0.4
Inventory / Sales (days)
-
2
2
2
2
Receivables (days)
80
86
87
87
87
Payables (days)
7
7
5
4
4
Wc cycle (ex-cash) (days)
72
81
84
85
85
September 8, 2016
9
Navkar Corporation | 1QFY2017 Result Update
Research Team Tel: 022 - 39357800
DISCLAIMER
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registered entity with SEBI for Research Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number
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offering of securities of the company covered by Analyst during the past twelve months.
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decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
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Disclosure of Interest Statement
Navkar Corporation
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15)
September 8, 2016
10
