2QFY2017 Result Update | Logistics
December 2, 2016
Navkar Corporation
BUY
CMP
`175
Performance Update
Target Price
`265
Y/E March (` cr)
2QFY17
2QFY16
% yoy
1QFY17
% qoq
Investment Period
12 Months
Net sales
90
86
5.2
90
(0.2)
EBITDA
33
37
(9.8)
38
(12.8)
Stock Info
EBITDA margin (%)
37.1
43.3
(618bp)
42.4
(536bp)
Sector
Logistics
Adjusted PAT
22
22
4.1
24
(4.7)
Market Cap (` cr)
2,567
Source: Company, Angel Research
Net Debt
161
Beta
0.6
Navkar Corporation (NCL) reported a subdued set of numbers for 2QFY2017.
52 Week High / Low
224 / 151
The consolidated top-line grew by ~5% yoy; while on the operating front, the
Avg. Daily Volume
13,323
company reported a margin contraction on account of prolonged monsoons that
Face Value (Rs)
10
resulted in higher operational costs. The net profit grew by ~4% yoy due to lower
BSE Sensex
26,431
subdued sales and poor operating performance.
Nifty
8,138
Reuters Code
NA
Top-line grew ~5% yoy: The consolidated top-line reported lower growth, which
Bloomberg Code
[email protected]
is ~5% yoy to ~`90cr mainly on account of change in EXIM mix & few shipping
lines discontinuing their incentive structure, resulting in lower tariff. However,
volumes at Vapi improved handling 1,225 TEUs in 2QFY17 vs. 305 TEUs in
Shareholding Pattern (%)
1QFY17.
Promoters
72.9
PAT grew ~4% yoy: On the operating front, the company reported a margin
MF / Banks / Indian Fls
15.1
contraction of 618bp yoy to 37.1% on account of prolonged monsoons that
FII / NRIs / OCBs
7.8
resulted in higher operational costs. As a result, the EBITDA de-grew by ~10% yoy
Indian Public / Others
4.3
to `33cr. However, net profit grew by 4.1% on back of lower interest cost.
Outlook and Valuation: We estimate NCL to post a revenue CAGR of ~27% and
PAT CAGR of ~31% over FY2016-18E. At the current level, the stock is trading at
Abs. (%)
3m 1yr 3yr
15.2x its FY2018E earnings. Historically, NCL has consistently grown at JNPT and
Sensex
(6.6)
1.5
27.1
increased its utilisation from 68% in FY2012 to 87% in FY2015 by leveraging on
NCL
(10.9)
(9.3)
NA
its rail advantage during periods when JNPT posted flattish volume growth. Going
forward, we expect NCL’s utilization to improve and the company to garner a
Historical share price chart
good chunk of business over the next three to four years due to its rail advantage
240
at both JNPT and Vapi. We maintain our Buy recommendation on the stock with a
220
target price of `265.
200
Key Financials
180
Y/E March (` cr)
FY2014
FY2015
FY2016
FY2017E FY2018E
160
Net sales
349
329
347
369
561
140
% chg
4.8
(5.9)
5.6
6.2
52.0
120
Adj. Net profit
90
68
95
103
164
% chg
58.7
(24.0)
39.0
8.2
59.5
EBITDA margin (%)
35.5
40.7
43.2
42.9
42.3
Source: Company, Angel Research
EPS (`)
6.3
4.8
6.7
7.2
11.5
P/E (x)
27.7
36.5
26.2
24.2
15.2
P/BV (x)
5.8
3.3
1.9
1.8
1.6
RoE (%)
21.0
9.1
7.3
7.3
10.5
RoCE (%)
12.8
9.1
7.5
7.5
10.8
Amarjeet S Maurya
EV/Sales (x)
8.3
9.3
7.7
7.8
5.1
022-40003600 Ext: 6831
EV/EBITDA (x)
23.5
22.8
17.7
18.1
12.1
[email protected]
Source: Company, Angel Research; Note: CMP as of December 1, 2016
Please refer to important disclosures at the end of this report
1
Navkar Corporation | 2QFY2017 Result Update
Exhibit 1: 4QFY2016 Performance
Y/E March (` cr)
2QFY17
2QFY16
% yoy
1QFY17
% qoq
1HFY17
1HFY16
% chg
Net Sales
90
86
5.2
90
(0.2)
177
168
5.4
Staff Costs
8
6
29.3
7
10.6
14
11
24.3
(% of Sales)
8.8
7.1
164
7.9
86
8.1
6.8
123
Other Expenses
49
42
14.8
45
8.9
90
81
10.9
(% of Sales)
54.1
49.6
455
49.6
450
51.1
48.5
253
Total Expenditure
57
49
16.7
52
9.1
104
93
12.5
Operating Profit
33
37
(9.8)
38
(12.8)
72
75
(3.5)
OPM
37.1
43.3
(618bp)
42.4
(536bp)
40.9
44.6
Interest
6
12
(50.0)
11
(46.1)
17
25
(33.0)
Depreciation
5
5
5.6
5
(0.8)
10
10
0.5
Other Income
3
4
(20.6)
4
(23.4)
12
10
26.8
PBT (excl. Ext Items)
26
24
5.1
26
(2.7)
58
49
16.9
Ext (Income)/Expense
-
-
-
-
-
PBT (incl. Ext Items)
26
24
5.1
26
(2.7)
58
49
16.9
(% of Sales)
28.4
28.4
29.1
32.7
29.5
Provision for Taxation
3
3
3
6
6
9.8
(% of PBT)
12.2
11.4
10.4
11.0
11.7
Reported PAT
22
22
4.1
24
(4.7)
51
44
17.8
PATM
24.9
25.2
26.1
29.1
26.0
Minority Interest After NP
Extra-ordinary Items
Reported PAT
22
22
4.1
23.5
(4.7)
51
44
17.8
PATM
24.9
25.2
26.1
29.1
26.0
Source: Company, Angel Research
December 2, 2016
2
Navkar Corporation | 2QFY2017 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.
Utilizing real estate for debt reduction
NCL has approved the opportunistic monetization of 45acres land in Panvel
through residential development format. In this, NCL will appoint a developer and
inturn will receive a share of ~2 mn sqft of sale area with an expected inflow of
`6bn. This will be utilized to reduce debt.
December 2, 2016
3
Navkar Corporation | 2QFY2017 Result Update
Outlook and Valuation
We estimate NCL to post a revenue CAGR of ~27% and PAT CAGR of ~31% over
FY2016-18E. At the current level, the stock is trading at 15.2x its FY2018E
earnings. Historically, NCL 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 utilization to improve and the company 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.
December 2, 2016
4
Navkar Corporation | 2QFY2017 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
December 2, 2016
5
Navkar Corporation | 2QFY2017 Result Update
Consolidated Profit & Loss Statement
Y/E March (` cr)
FY2014
FY2015
FY2016
FY2017E
FY2018E
Total operating income
349
329
347
369
561
% chg
4.8
(5.9)
5.6
6.2
52.0
Total Expenditure
225
195
197
211
324
Operating Expenses
117
138
144
153
234
Purchases of Traded Goods
60
-
-
-
-
Personnel Expenses
19
22
25
28
44
Others Expenses
29
34
29
30
45
EBITDA
124
134
150
158
237
% chg
21.9
7.9
12.2
5.4
49.9
(% of Net Sales)
35.5
40.7
43.2
42.9
42.3
Depreciation& Amortisation
13
15
19
21
23
EBIT
111
119
131
137
214
% chg
21.3
6.8
10.2
5.0
55.9
(% of Net Sales)
31.8
36.1
37.7
37.2
38.2
Interest & other Charges
33
26
23
31
34
Other Income
4
2
23
15
14
(% of PBT)
4.7
2.3
17.7
12.4
7.0
Share in profit of Associates
-
-
-
-
-
Recurring PBT
82
94
131
121
193
% chg
28.4
15.3
38.6
(7.4)
59.5
Prior Period & Extra. Exp./(Inc.)
-
-
-
-
-
PBT (reported)
82
94
131
121
193
Tax
9
12
19
18
29
(% of PBT)
10.8
12.4
14.6
15.0
15.0
PAT (reported)
73
83
112
103
164
Extraordinary Items
17
(14)
(17)
-
-
ADJ. PAT
90
68
95
103
164
% chg
58.7
(24.0)
39.0
8.2
59.5
(% of Net Sales)
25.8
20.8
27.4
27.9
29.3
Basic EPS (`)
6.3
4.8
6.7
7.2
11.5
Fully Diluted EPS (`)
6.3
4.8
6.7
7.2
11.5
% chg
58.7
(24.0)
39.0
8.2
59.5
December 2, 2016
6
Navkar Corporation | 2QFY2017 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
1,256
1,421
Shareholders’ Funds
428
750
1,298
1,401
1,565
Minority Interest
-
-
-
-
-
Total Loans
437
555
452
440
420
Deferred Tax Liability
28
33
33
33
33
Total Liabilities
893
1,338
1,783
1,874
2,018
APPLICATION OF FUNDS
Gross Block
699
1,133
1,256
1,529
1,549
Less: Acc. Depreciation
43
59
79
100
123
Net Block
656
1,073
1,177
1,429
1,426
Capital Work-in-Progress
44
27
27
27
27
Investments
20
5
-
-
-
Current Assets
198
253
603
435
592
Inventories
-
2
2
3
5
Sundry Debtors
76
77
83
89
135
Cash
1
1
290
74
54
Loans & Advances
45
48
52
66
101
Other Assets
76
126
175
203
297
Current liabilities
25
22
25
19
28
Net Current Assets
172
231
577
416
564
Deferred Tax Asset
1
1
1
1
1
Mis. Exp. not written off
-
-
-
-
-
Total Assets
893
1,338
1,783
1,874
2,018
December 2, 2016
7
Navkar Corporation | 2QFY2017 Result Update
Consolidated Cashflow Statement
Y/E March (` cr)
FY2014
FY2015
FY2016
FY2017E FY2018E
Profit before tax
99
80
131
121
193
Depreciation
13
15
19
21
23
Change in Working Capital
(29)
7
(56)
(56)
(167)
Interest / Dividend (Net)
33
26
23
31
34
Direct taxes paid
(16)
(22)
(19)
(18)
(29)
Others
(17)
18
-
-
-
Cash Flow from Operations
82
123
98
99
55
(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
(31)
(34)
Cash Flow from Financing
10
71
310
(43)
(54)
Inc./(Dec.) in Cash
(1)
0
289
(217)
(20)
Opening Cash balances
2
1
1
290
74
Closing Cash balances
1
1
290
74
54
December 2, 2016
8
Navkar Corporation | 2QFY2017 Result Update
Key Ratios
Y/E March
FY2014
FY2015
FY2016
FY2017E FY2018E
Valuation Ratio (x)
P/E (on FDEPS)
27.7
36.5
26.2
24.2
15.2
P/CEPS
29.0
25.5
19.1
20.1
13.3
P/BV
5.8
3.3
1.9
1.8
1.6
Dividend yield (%)
0.0
0.0
0.0
0.0
0.0
EV/Sales
8.3
9.3
7.7
7.8
5.1
EV/EBITDA
23.5
22.8
17.7
18.1
12.1
EV / Total Assets
3.2
2.2
1.5
1.5
1.4
Per Share Data (`)
EPS (Basic)
6.3
4.8
6.7
7.2
11.5
EPS (fully diluted)
6.3
4.8
6.7
7.2
11.5
Cash EPS
6.0
6.9
9.2
8.7
13.1
DPS
0.0
0.0
0.0
0.0
0.0
Book Value
30.0
52.6
91.0
98.3
109.8
Returns (%)
ROCE
12.8
9.1
7.5
7.5
10.8
Angel ROIC (Pre-tax)
13.2
9.1
9.0
7.8
11.1
ROE
21.0
9.1
7.3
7.3
10.5
Turnover ratios (x)
Asset Turnover (Gross Block)
0.5
0.3
0.3
0.2
0.4
Inventory / Sales (days)
-
2
2
3
3
Receivables (days)
80
86
87
88
88
Payables (days)
7
7
5
4
4
Wc cycle (ex-cash) (days)
72
81
84
87
87
December 2, 2016
9
Navkar Corporation | 2QFY2017 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
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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)
December 2, 2016
10