3QFY2016 Result Update | Logistics
February 3, 2016
Transport Corporation of India
NEUTRAL
CMP
`242
Performance Highlights
Target Price
-
Quarterly Data (Standalone)
Investment Period
-
(` cr)
3QFY16
3QFY15
% yoy
2QFY15
% qoq
Revenue
551
555
(0.6)
556
(0.8)
EBITDA
44
42
5.0
44
0.8
Stock Info
Margin (%)
8.0
7.6
43
7.9
13
Sector
Logistics
Reported PAT
19
17
10.7
23
(18.8)
Market Cap (` cr)
1,847
Source: Company, Angel Research
Net Debt (` cr)
286
Transport Corporation of India Ltd (TCIL)’s top-line & bottom-line for 3QFY2016
Beta
1.6
came in below our estimates. The top-line has come in flat on a yoy basis, with all
52 Week High / Low
348 / 198
business segments posting poor performances, barring the Seaways division. On
Avg. Daily Volume
27,910
the operating front, the company showed a slight improvement in margins.
Face Value (`)
2
Further, lower interest costs and tax rate boosted the overall profitability.
BSE Sensex
24,539
Muted standalone top-line performance: TCIL’s numbers for the quarter
Nifty
7,456
have come in below our estimates. The top-line, at ~`551cr, is flat on a yoy
Reuters Code
TCIL.BO
basis, with all business segments posting poor performances on the revenue front,
Bloomberg Code
[email protected]
barring the Seaways divisions, which reported a growth of ~16% yoy to ~`35cr.
Slight improvement in operating margin and lower interest costs boost overall
Shareholding Pattern (%)
PAT: For the quarter, the company reported an operating profit of ~`44cr, up
Promoters
66.5
~5% yoy. Further, the company’s operating margin expanded by 43bp yoy to
MF / Banks / Indian Fls
6.5
8.0%, primarily on account of decline in operating expenses as a percentage of
FII / NRIs / OCBs
2.9
sales by 207bp yoy. The net profit grew by ~11% yoy to ~`19cr. The growth
Indian Public / Others
24.1
however is lower than our estimate, mainly due to flattish sales during the quarter.
Outlook and valuation: TCIL benefits from its pan-India scale, which gives it a
Abs. (%)
3m 1yr
3yr
competitive advantage in the higher-margin segments of the logistics industry; as
Sensex
(7.6)
(15.7)
24.2
well as from its asset-light business model which cushions its profitability in
cyclical downturns and gives it an attractive ROE profile. The company is well-
TCIL
9.2
(5.3)
250.9
placed to be a key beneficiary of the anticipated implementation of the GST.
However, in the last few quarters, the company has not been able to report good
3-year price chart
numbers, both on the top-line and bottom-line fronts, due to delay in pick-up in
400
350
economic activities. Hence we are maintaining our NEUTRAL rating on the stock.
300
250
Key financials (Consolidated)
200
Y/E March (` cr)
FY2014
FY2015
FY2016E
FY2017E
150
100
Net sales
2,228
2,417
2,460
2,671
50
% chg
4.5
8.4
1.8
8.6
0
Net profit
72
81
91
105
% chg
3.0
13.6
12.0
14.9
EBITDA margin (%)
7.6
8.0
8.3
8.5
Source: Company, Angel Research
EPS (`)
9.5
10.8
12.1
13.9
P/E (x)
25.6
22.5
20.1
17.5
P/BV (x)
3.7
3.0
2.7
2.4
RoE (%)
14.6
13.2
13.3
13.7
RoCE (%)
14.9
14.6
14.3
14.8
Amarjeet S Maurya
EV/Sales (x)
0.9
0.9
0.9
0.8
022-39357800 Ext: 6831
EV/EBITDA (x)
12.4
11.0
10.3
9.3
[email protected]
Source: Company, Angel Research; Note: CMP as of February 2, 2015
Please refer to important disclosures at the end of this report
1
Transport Corporation of India | 3QFY2016 Result Update
Exhibit 1: Standalone quarterly performance
Y/E March (` cr)
3QFY16
3QFY15
% yoy
2QFY15
% qoq
9MFY16
9MFY15
% chg
Net Sales
551
555
(0.64)
556
(0.8)
1,656
1,631
1.5
Operating Expense
434
448
(3.2)
437
(0.7)
1,311
1,321
(0.8)
(% of Sales)
78.7
80.8
78.6
79.2
81.0
Staff Costs
39
31
25.6
37
6.5
111
92
21.0
(% of Sales)
7.1
5.6
6.6
6.7
5.6
Other Expense
34
33
1.9
38
(11.1)
105
95
10.3
(% of Sales)
6.2
6.0
6.9
6.3
5.8
Total Expenditure
507
513
(1.1)
512
(0.9)
1,526
1,508
1.3
Operating Profit
44
42
5.0
44
0.8
129
124
4.6
OPM (%)
8.0
7.6
7.9
7.8
7.6
Interest
7
9
(23.4)
7
0.1
21
25
Depreciation
13
12
4.4
13
(1.3)
39
36
6.4
Other Income
(0.1)
1.8
(102.8)
6.2
(100.8)
10
9
15.2
PBT
24
22
8.6
30
(19.1)
80
71
12.4
Ext Income/(Expense)
-
-
-
-
-
-
-
-
PBT (incl. Ext Items)
24
22
8.6
30
(71.5)
80
71
12.4
(% of Sales)
4.4
4.0
5.4
4.8
4.4
Provision for Taxation
5
5
1.7
7
(20.2)
19
17
13.7
(% of PBT)
22.0
23.5
22.3
23.9
23.6
Minority Interest
-
-
-
-
-
-
-
-
Recurring PAT
19
17
10.7
23
(18.8)
61
54
12.0
PATM
3.4
3.1
4.2
3.7
3.3
Exceptional items
-
-
-
-
-
-
-
-
Reported PAT
19
17
10.7
23
(18.8)
61
54
12.0
Equity shares (cr)
7.6
7.6
7.6
7.6
7.6
FDEPS (`)
2.5
2.2
10.7
3.1
(18.8)
8.0
7.2
12.0
Source: Company, Angel Research
February 3, 2016
2
Transport Corporation of India | 3QFY2016 Result Update
Muted standalone top-line performance
TCIL’s numbers for the quarter have come in below our estimates. The top-line, at
~`551cr, is flat on a yoy basis, with all business segments posting poor
performances on the revenue front, barring the Seaways division, which reported a
growth of ~16% yoy to ~`35cr.
The company’s Freight segment reported a de-growth of ~4% yoy while the XPS
segment reported a de-growth of ~2% yoy. The Supply Chain Solutions segment
reported a subdued ~2% yoy growth due to slowdown in the automobile sector
(the sector accounts for ~75% of this segment’s business).
Exhibit 2: Top-line growth trend
Exhibit 3: Segment wise revenue trend
8
580
250
211
210
207
560
6
205
204
203
190
200
540
4
167
171
169
167
158
160
153
151
157
151
150
147
520
2
150
160
159
500
-
100
480
(2)
34
37
35
50
28
29
30
32
460
(4)
2
3
1
1
2
3
1
0
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
Standalone Top-line
QoQ growth (%)
Freight
XPS Cargo
Wind Power
Supply Chain
Seaways
Source: Company, Angel Research
Source: Company, Angel Research
Operating margin expands due to lower operating expenses
For the quarter, the company reported an operating profit of ~`44cr, up ~5% yoy.
Further, the company’s operating margin expanded by 43bp yoy to
8.0%,
primarily on account of decline in operating expenses as a percentage of sales by
207bp yoy.
Exhibit 4: Operating profit and margin trend
50
9.0
45
8.0
40
7.0
35
6.0
30
5.0
25
4.0
20
3.0
15
10
2.0
5
1.0
0
0.0
Operating Profit
Margin (%)
Source: Company, Angel Research
February 3, 2016
3
Transport Corporation of India | 3QFY2016 Result Update
Slight improvement in operating margin and lower interest
costs boost overall PAT
In 3QFY2016, TCIL posted an earnings growth of ~11% yoy to ~`19cr, owing to
improvement in the operating performance and lower interest costs.
Exhibit 5: Net Profit trend
25
50
40
20
30
20
15
10
10
-
(10)
5
(20)
0
(30)
PAT
QoQ growth (%)
Source: Company, Angel Research
February 3, 2016
4
Transport Corporation of India | 3QFY2016 Result Update
Investment rationale
Top-line to report 5% CAGR over FY2015-17E on economic
revival; eventual GST implementation would provide further
boost
We expect TCIL to report a healthy top-line growth of
~5% CAGR over
FY2015-17E on the back of revival in the Indian economy. Among TCIL’s four
business segments, we expect healthy growth in the Express segment. TCIL is also
well-placed to garner e-commerce business, as bulkier categories like furniture
and white goods see more traction in online sales. We expect the Supply Chain
Solutions segment also to report healthy growth owing to recovery in the
automobile sector, growth in e-commerce fulfillment hubs, as well as new
customer wins due to increasing outsourcing of supply chain in other sectors like
FMCG, chemicals, cold storage, etc, especially once GST kicks in. The other two
segments, viz Freight and Seaways, are also likely to benefit from an economic
revival.
Well positioned due to its Asset-light business model
TCIL operates on an asset-light business model where it owns 20% of the total fleet
and leases the remaining 80%. The company has scaled its business model to
7,000 trucks/trailers/reefer vehicles as of today. On the same lines, TCIL has been
prudent in managing warehousing space, as a majority of its total 10mn sq ft of
warehousing space is on a lease basis. With its focus to invest less on building the
asset base, the company has been able to generate healthy return ratios even in
the worst phases of business cycles. Given the company’s unlevered business
model, we are of the view that the long-term growth prospects of the company
would not be impacted due to lack of capital availability.
TCIL is one of the few companies in Surface Transportation & Logistics space,
which has consistently enjoyed a healthy asset turnover (FY2015 asset turnover
ratio at 4.8x) and ROE (FY2015 ROE at 13.3%). Given the strong matrices the
company displays, we are confident that TCIL at any phase of the business cycle
would be well positioned compared to its peers, which have levered business
models and have lower ROEs.
February 3, 2016
5
Transport Corporation of India | 3QFY2016 Result Update
Outlook and valuation
TCIL benefits from its pan-India scale, which gives it a competitive advantage in
higher-margin segments of the logistics industry; as well as from its asset-light
business model which cushions its profitability in cyclical downturns and gives it an
attractive ROE profile. The company is well-placed to be a key beneficiary of the
anticipated implementation of the GST. However, in the last few quarters the
company has not been able report good numbers, both on the top-line and
bottom-line fronts, due to delay in pick-up in economic activities. Hence we are
downgrading our estimates. Currently, we have a NEUTRAL rating on the stock.
Company background
Transport Corporation of India Limited (TCI) is an integrated supply chain and
logistics solutions provider. The company operates in six business divisions: TCI
Freight, TCI XPS, TCI Supply Chain Solutions, TCI Seaways, TCI Global and TCI
Foundation. TCI Freight offers multimodal transport solutions for cargo of any
dimension. TCI XPS is a door-to-door express distribution specialist. TCI Supply
Chain Solutions provides supply chain solutions and services right from
conceptualization to implementation. TCI Seaways caters to the costal cargo
requirements for transporting container and bulk cargo from parts on the east
coast of India to Port Blair in the Andaman and Nicobar Islands and further
distribution within the islands. TCI Global provides a single window advantage to
its customers across all South East Asian countries.
February 3, 2016
6
Transport Corporation of India | 3QFY2016 Result Update
Consolidated Profit & Loss Statement
Y/E March (` cr)
FY2013
FY2014
FY2015
FY2016E
FY2017E
Total operating income
2,132
2,228
2,417
2,460
2,671
% chg
9.0
4.5
8.4
1.8
8.6
Total Expenditure
1,957
2,058
2,224
2,256
2,444
Personnel Expenses
112
117
130
140
160
Others Expenses
1,845
1,941
2,093
2,116
2,283
EBITDA
175
170
193
204
227
% chg
10.6
(2.7)
13.6
5.7
11.2
(% of Net Sales)
8.2
7.6
8.0
8.3
8.5
Depreciation & Amortisation
46
47
55
57
64
EBIT
128
123
139
147
163
% chg
10.3
(4.0)
12.5
5.9
11.0
(% of Net Sales)
6.0
5.5
5.7
6.0
6.1
Interest & other Charges
34
31
33
30
29
Other Income
6
7
9
12
14
(% of PBT)
6.3
7.2
7.9
9.3
9.5
Share in profit of Associates
-
-
-
-
-
Recurring PBT
101
99
114
129
148
% chg
18.1
(1.8)
15.2
12.6
14.9
Prior Period & Extra. Exp./(Inc.)
-
-
0
-
-
PBT (reported)
101
99
114
129
148
Tax
32
27
33
37
43
(% of PBT)
31.2
27.7
28.5
29.0
29.0
PAT (reported)
70
72
82
91
105
Add: Share of earnings of asso.
-
-
-
-
-
Less: Minority interest (MI)
0
0
0
0
0
PAT after MI (reported)
70
72
81
91
105
ADJ. PAT
70
72
82
91
105
% chg
16.8
3.0
13.6
12.0
14.9
(% of Net Sales)
3.3
3.2
3.4
3.7
3.9
Basic EPS (`)
9.2
9.5
10.8
12.1
13.9
Fully Diluted EPS (`)
9.2
9.5
10.8
12.1
13.9
% chg
16.8
3.0
13.6
12.0
14.9
February 3, 2016
7
Transport Corporation of India | 3QFY2016 Result Update
Consolidated Balance sheet
Y/E March (` cr)
FY2013
FY2014
FY2015
FY2016E FY2017E
SOURCES OF FUNDS
Equity Share Capital
15
15
15
15
15
Reserves& Surplus
422
476
601
672
752
Shareholders Funds
437
491
616
688
767
Minority Interest
1
3
3
3
3
Total Loans
354
336
336
336
336
Deferred Tax Liability
32
33
33
33
33
Total Liabilities
824
863
988
1,059
1,139
APPLICATION OF FUNDS
Gross Block
652
693
823
973
1,123
Less: Acc. Depreciation
234
262
316
374
438
Net Block
418
432
507
600
686
Capital Work-in-Progress
5
18
18
18
18
Investments
8
8
7
7
7
Current Assets
534
543
603
599
614
Inventories
2
2
2
2
2
Sundry Debtors
395
380
420
418
446
Cash
46
43
42
47
56
Loans & Advances
67
65
79
74
40
Other Assets
24
53
60
59
69
Current liabilities
141
138
148
165
186
Net Current Assets
393
405
455
434
428
Mis. Exp. not written off
-
-
-
-
-
Total Assets
824
863
988
1,059
1,139
February 3, 2016
8
Transport Corporation of India | 3QFY2016 Result Update
Consolidated Cash flow
Y/E March (` cr)
FY2013
FY2014
FY2015
FY2016E FY2017E
Profit before tax
101
99
114
129
148
Depreciation
46
47
55
57
64
Change in Working Capital
(46)
15
(51)
26
16
Interest / Dividend (Net)
29
25
33
30
29
Direct taxes paid
(26)
(28)
(33)
(37)
(43)
Others
0
0
-
-
-
Cash Flow from Operations
104
158
118
205
214
(Inc.)/ Dec. in Fixed Assets
(55)
(98)
(128)
(150)
(150)
(Inc.)/ Dec. in Investments
(6)
-
1
-
-
Cash Flow from Investing
(61)
(98)
(129)
(150)
(150)
Issue of Equity
1
1
60
-
-
Inc./(Dec.) in loans
13
(19)
-
-
-
Dividend Paid (Incl. Tax)
(8)
(12)
(16)
(20)
(25)
Interest / Dividend (Net)
(35)
(33)
(33)
(30)
(29)
Cash Flow from Financing
(28)
(63)
10
(50)
(54)
Inc./(Dec.) in Cash
15
(3)
(1)
5
10
Opening Cash balances
31
46
43
42
47
Closing Cash balances
46
43
42
47
57
February 3, 2016
9
Transport Corporation of India | 3QFY2016 Result Update
Key Ratios
Y/E March
FY2013
FY2014
FY2015
FY2016E
FY2017E
Valuation Ratio (x)
P/E (on FDEPS)
26.3
25.6
22.5
20.1
17.5
P/CEPS
15.8
15.4
13.4
12.3
10.8
P/BV
4.2
3.7
3.0
2.7
2.4
Dividend yield (%)
0.6
0.7
0.9
1.1
1.4
EV/Sales
1.0
0.9
0.9
0.9
0.8
EV/EBITDA
12.2
12.4
11.0
10.3
9.3
EV / Total Assets
2.2
2.1
1.9
1.7
1.6
Per Share Data (`)
EPS (Basic)
9.2
9.5
10.8
12.1
13.9
EPS (fully diluted)
9.2
9.5
10.8
12.1
13.9
Cash EPS
15.3
15.7
18.0
19.7
22.4
DPS
1.5
1.8
2.2
2.7
3.3
Book Value
57.8
64.9
81.4
90.9
101.4
Returns (%)
ROCE
16.2
14.9
14.6
14.3
14.8
Angel ROIC (Pre-tax)
17.4
15.9
15.4
15.1
15.7
ROE
15.9
14.6
13.2
13.3
13.7
Turnover ratios (x)
Asset Turnover (Gross Block)
5.1
5.2
4.8
4.1
3.9
Inventory / Sales (days)
0
0
0
0
0
Receivables (days)
68
62
63
62
61
Payables (days)
15
13
12
12
12
WC cycle (days)
53
50
52
50
49
Solvency ratios (x)
Net debt to equity
0.7
0.6
0.4
0.5
0.5
Net debt to EBITDA
1.7
1.7
1.3
1.5
1.4
Interest Coverage (EBIT / Int.)
3.8
4.0
4.4
4.8
5.7
February 3, 2016
10
Transport Corporation of India | 3QFY2016 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
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Disclosure of Interest Statement
Transport Corporation of India
1. Analyst ownership of the stock
No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
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%)
February 3, 2016
11