3QFY2016 Result Update | Logistics
February 11, 2016
Navkar Corporation
BUY
CMP
`176
Performance Update
Target Price
`265
Y/E March (` cr)
3QFY2016 3QFY2015
% chg (yoy) 2QFY2016
% chg (qoq)
Investment Period
-
Net sales
88
84
4.6
86
3.1
Sector
Logistics
EBITDA
37
37
0.9
37
(0.0)
Market Cap (Rs cr)
2,460
EBITDA margin (%)
42.0
43.5
(154bp)
43.3
(130bp)
Net Debt
549
Adjusted PAT
29
16
83.0
22
33.7
Beta
0.6
Source: Company, Angel Research
52 Week High / Low
221 / 151
Avg. Daily Volume
61,027
Navkar Corporation (Navkar) reported a mixed set of numbers for 3QFY2016.
Face Value (Rs)
10
The consolidated top-line grew by ~5% yoy. On the operating front, the company
BSE Sensex
22,952
reported a margin contraction on account of higher operating and employee
Nifty
6,976
expenses. However, the net profit grew by ~83% yoy (after factoring in forex
Reuters Code
NA
losses) due to higher other income and lower interest related expenses.
Bloomberg Code
[email protected]
Top-line grew ~5% yoy: The consolidated top-line grew by ~5% yoy to ~`88cr
owing to subdued EXIM volumes. Volume grew ~7% yoy to 80,815 TEUs, mainly
Shareholding Pattern (%)
due to a higher mix of imports. The commodity mix comprised of agro products
Promoters
72.9
(~43%), hazardous products (~14%) while other product categories accounted
for the balance ~43%.
MF / Banks / Indian Fls
15.3
PAT grew ~83% yoy despite operating margin contraction: On the operating
FII / NRIs / OCBs
6.2
front, the company reported a margin contraction of 154bp yoy to 42.0% on
Indian Public / Others
5.7
account of higher operating and employee expenses. As a result, the EBITDA
came in flat yoy at ~`37cr. However, the net profit grew by ~83% yoy to ~`29cr
Abs. (%)
3m 1yr 3yr
due to higher other income and lower interest related expenses.
Sensex
(7.7)
(16.2)
22.1
Outlook and Valuation: We estimate Navkar to post a revenue CAGR of ~26%
NCL
2.9
NA NA
and PAT CAGR of ~31% over FY2015-18E. We have factored in lower utilization
levels of 33.2% and 42.2% for FY2017E and FY2018E, respectively. At the current
levels, the stock is trading at 15.3x its FY2018E earnings. Historically, Navkar has
Historical share price chart
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
220
210
posted flattish volume growth. Going forward, we expect Navkar’s utilizations to
200
190
improve; we expect the company to be able to garner a good chunk of business
180
over the next three to four years due to its rail advantage at both JNPT and Vapi.
170
160
We maintain our Buy recommendation on the stock with a target price of `265.
150
140
Key Financials
Y/E March (` cr)
FY2014
FY2015
FY2016E
FY2017E FY2018E
Net sales
349
329
365
436
664
Source: Company, Angel Research
% chg
4.8
(5.9)
11.2
19.3
52.2
Adj. Net profit
90
73
80
84
164
% chg
58.7
(18.7)
9.9
4.3
95.8
EBITDA margin (%)
35.5
40.7
38.3
37.5
37.5
EPS (`)
6.3
5.1
5.6
5.9
11.5
Amarjeet S Maurya
P/E (x)
27.9
34.3
31.2
29.9
15.3
022-40003600 Ext: 6831
P/BV (x)
5.9
3.3
2.0
1.8
1.6
[email protected]
RoE (%)
21.0
9.7
6.3
6.1
10.7
RoCE (%)
12.8
9.1
6.7
7.5
11.4
Milan Desai
EV/Sales (x)
8.4
9.3
7.7
6.6
4.3
022-40003600 Ext: 6846
EV/EBITDA (x)
23.6
22.8
20.1
17.6
11.4
[email protected]
Source: Company, Angel Research Note: CMP as of February 11, 2016
Please refer to important disclosures at the end of this report
1
Navkar Corporation | 3QFY2016 Result Update
Exhibit 1: 3QFY2016 performance
Y/E March (` cr)
3QFY16
3QFY15
% chg. (yoy)
2QFY16
% chg. (qoq)
9MFY16
9MFY15
% chg
Net Sales
88
84
4.6
86
3.1
256
245
4.6
Operating Expenses
36
33
10.9
35
4.3
105
101
3.2
(% of Sales)
41.0
38.7
40.5
40.9
41.5
Employee Cost
7
5
33.1
6
12.8
18
16
17.7
(% of Sales)
7.8
6.1
7.1
7.2
6.4
Other Expenses
8
10
(17.3)
8
4.5
21
21
(1.2)
(% of Sales)
9.2
11.7
9.1
8.3
8.7
Total Expenditure
51
48
7.5
49
5.4
144
138
4.1
Operating Profit
37
37
0.9
37
(0.0)
112
106
5
OPM (%)
42.0
43.5
(154)
43.3
(130)
43.7
43.4
27
Interest
7
17
(55.8)
12
(39.0)
33
37
(11.6)
Depreciation
5
4
30.4
5
0.1
15
11
28.8
Other Income
10
1
1,858.8
4
142.1
17
2
905.2
PBT
35
17
106.1
24
43.3
81
60
36.3
(% of Sales)
39.5
20.0
28.4
31.7
24.3
Tax
6
1
417.5
3
118.7
12
4
235.3
(% of PBT)
17.3
6.9
11.3
14.6
5.9
Reported PAT
29
16
83.0
22
33.7
69
56
23.8
Extraordinary Expense/(Inc.)
-
-
-
-
-
Adjusted PAT
29
16
83.0
22
33.7
69
56
23.8
PATM
32.6
18.7
25.2
27.1
22.9
Source: Company, Angel Research
February 11, 2016
2
Navkar Corporation | 3QFY2016 Result Update
Investment Arguments
Upcoming ICD to provide an edge
The Vapi region has a huge market 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 ICD (with rail
connectivity) will enable Navkar to garner a good portion of the business from the
region. At present, imports headed for the region have to get custom cleared at
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 is 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. Navkar 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 Navkar
(~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.
Navkar 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 Navkar.
February 11, 2016
3
Navkar Corporation | 3QFY2016 Result Update
Outlook and Valuation
We estimate Navkar to post a revenue CAGR of ~26% and PAT CAGR of ~31%
over FY2015-18E. We have factored in lower utilization levels of 33.2% and 42.2%
for FY2017E and FY2018E, respectively. At the current levels, the stock is trading
at 15.3x 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 Navkar’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 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.
February 11, 2016
4
Navkar Corporation | 3QFY2016 Result Update
Company Background
Navkar 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,
Navkar’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
February 11, 2016
5
Navkar Corporation | 3QFY2016 Result Update
Consolidated Profit & Loss Statement
Y/E March (` cr)
FY13
FY14
FY15
FY16E
FY17E
FY18E
Total operating income
333
349
329
365
436
664
% chg
24.4
4.8
(5.9)
11.2
19.3
52.2
Total Expenditure
232
225
195
225
273
415
Operating Expenses
92
117
138
157
188
289
Purchases of Traded Goods
105
60
-
-
-
-
Personnel Expenses
17
19
22
26
34
53
Others Expenses
18
29
34
42
50
73
EBITDA
102
124
134
140
164
249
% chg
12.9
21.9
7.9
4.5
16.8
52.2
(% of Net Sales)
30.5
35.5
40.7
38.3
37.5
37.5
Depreciation& Amortisation
10
13
15
22
28
30
EBIT
92
111
119
118
135
219
% chg
11.5
21.3
6.9
(0.3)
14.4
61.7
(% of Net Sales)
27.5
31.8
36.1
32.4
31.0
33.0
Interest & other Charges
32
33
26
41
47
42
Other Income
5
4
2
10
3
3
(% of PBT)
7.3
4.7
2.3
11.4
3.3
1.7
Share in profit of Associates
-
-
-
-
-
-
Recurring PBT
64
82
94
87
92
180
% chg
21.3
28.4
15.4
(7.5)
4.8
96.9
Prior Period & Extraord. Exp./(Inc.)
-
-
-
-
-
-
PBT (reported)
64
82
94
87
92
180
Tax
7
9
7
7
8
16
(% of PBT)
11.1
10.8
7.4
8.0
8.5
9.0
PAT (reported)
57
73
87
80
84
164
Extraordinary Items
0
17
(14)
-
-
-
ADJ. PAT
57
90
73
80
84
164
% chg
58.7
(18.7)
9.9
4.3
95.8
(% of Net Sales)
17.0
25.8
22.2
22.0
19.2
24.7
Basic EPS (`)
4.0
6.3
5.1
5.6
5.9
11.5
Fully Diluted EPS (`)
4.0
6.3
5.1
5.6
5.9
11.5
% chg
20.8
58.7
(18.7)
9.9
4.3
95.8
February 11, 2016
6
Navkar Corporation | 3QFY2016 Result Update
Consolidated Balance Sheet
Y/E March (` cr)
FY13
FY14
FY15
FY16E
FY17E
FY18E
SOURCES OF FUNDS
Equity Share Capital
17
21
112
145
145
145
Reserves& Surplus
299
407
638
1,139
1,222
1,387
Shareholders’ Funds
316
428
750
1,283
1,367
1,531
Minority Interest
-
-
-
-
-
-
Total Loans
444
437
555
495
440
390
Deferred Tax Liability
21
28
33
33
33
33
Total Liabilities
781
893
1,338
1,812
1,840
1,954
APPLICATION OF FUNDS
Gross Block
651
699
1,133
1,409
1,556
1,606
Less: Acc. Depreciation
30
43
59
81
109
139
Net Block
620
656
1,073
1,328
1,447
1,467
Capital Work-in-Progress
0
44
27
27
27
27
Investments
20
20
5
5
5
5
Current Assets
156
198
253
473
385
497
Inventories
-
-
2
2
2
4
Sundry Debtors
63
76
77
87
104
158
Cash
4
1
1
191
61
56
Loans & Advances
42
45
48
55
65
100
Other Assets
47
76
126
139
153
179
Current liabilities
16
25
22
23
26
43
Net Current Assets
140
172
231
450
360
454
Deferred Tax Asset
0
1
1
1
1
1
Mis. Exp. not written off
-
-
-
-
-
-
Total Assets
781
893
1,338
1,812
1,840
1,954
February 11, 2016
7
Navkar Corporation | 3QFY2016 Result Update
Consolidated Cashflow Statement
Y/E March (` cr)
FY13
FY14
FY15
FY16E
FY17E
FY18E
Profit before tax
64
99
80
87
92
180
Depreciation
10
13
15
22
28
30
Change in Working Capital
(19)
(29)
7
(29)
(39)
(99)
Interest / Dividend (Net)
32
33
26
41
47
42
Direct taxes paid
(15)
(16)
(22)
(7)
(8)
(16)
Others
0
(17)
18
-
-
-
Cash Flow from Operations
73
82
123
114
120
136
(Inc.)/ Dec. in Fixed Assets
(89)
(93)
(209)
(276)
(147)
(50)
(Inc.)/ Dec. in Investments
(20)
-
15
-
-
-
Cash Flow from Investing
(109)
(93)
(194)
(276)
(147)
(50)
Issue of Equity
43
35
-
453
-
-
Inc./(Dec.) in loans
27
10
97
(60)
(55)
(50)
Dividend Paid (Incl. Tax)
-
-
-
-
-
-
Interest / Dividend (Net)
11
1
(27)
412
(47)
(42)
Cash Flow from Financing
38
10
71
352
(102)
(92)
Inc./(Dec.) in Cash
1
(1)
0
189
(129)
(5)
Opening Cash balances
0
2
1
1
191
61
Closing Cash balances
2
1
1
191
61
56
February 11, 2016
8
Navkar Corporation | 3QFY2016 Result Update
Key Ratios
Y/E March
FY13
FY14
FY15
FY16E
FY17E
FY18E
Valuation Ratio (x)
P/E (on FDEPS)
44.3
27.9
34.3
31.2
29.9
15.3
P/CEPS
37.5
29.2
24.5
24.6
22.4
12.9
P/BV
7.9
5.9
3.3
2.0
1.8
1.6
Dividend yield (%)
0.0
0.0
0.0
0.0
0.0
0.0
EV/Sales
8.8
8.4
9.3
7.7
6.6
4.3
EV/EBITDA
28.8
23.6
22.8
20.1
17.6
11.4
EV / Total Assets
3.7
3.2
2.2
1.5
1.5
1.4
Per Share Data (`)
EPS (Basic)
4.0
6.3
5.1
5.6
5.9
11.5
EPS (fully diluted)
4.0
6.3
5.1
5.6
5.9
11.5
Cash EPS
4.7
6.0
7.2
7.2
7.9
13.6
DPS
0.0
0.0
0.0
0.0
0.0
0.0
Book Value
22.2
30.0
52.6
90.0
95.9
107.4
Returns (%)
ROCE
12.0
12.8
9.1
6.7
7.5
11.4
Angel ROIC (Pre-tax)
12.5
13.2
9.1
7.5
7.8
11.8
ROE
17.9
21.0
9.7
6.3
6.1
10.7
Turnover ratios (x)
Asset Turnover (Gross Block)
0.5
0.5
0.3
0.3
0.3
0.4
Inventory / Sales (days)
-
-
2
2
2
2
Receivables (days)
69
80
86
87
87
87
Payables (days)
5
7
7
5
4
4
Wc cycle (ex-cash) (days)
64
72
81
84
85
85
February 11, 2016
9
Navkar Corporation | 3QFY2016 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. 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 (Returns):
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
Reduce (-5% to -15%)
Sell (< -15%)
February 11, 2016
10