Technology

Navkar Corporation (Navkar) reported a good set of numbers for 4QFY2016.
The consolidated top-line grew by 8.5% yoy. On the operating front, the company
reported a margin expansion on account of sharp decline in other operating
expenses. The net profit grew by ~107% yoy due to significantly higher other
income and a better operating performance.
Top-line grew 8.5% yoy: The consolidated top-line grew by 8.5% yoy to ~Rs91cr
led by higher volumes and improvement in realizations. For 4QFY2016, the
volumes grew by 18.5% to 81,183 TEUs (twenty-foot equivalent units) which
included 2,000 TEUs from Vapi. Empty containers handled stood at 3,000 TEUs
against 5,000 TEUs handled in 3QFY2016 which improved the realizations. The
number of trains ran by the company increased by 14 over the past quarter to
220 trains. For FY2016, the volumes grew by ~15% to ~3,08,000 TEUs and the
company ran 765 trains during the year with the share of rail increasing to 22%
vs 15% in FY2015. The import-export mix remained unchanged at 55:45.
PAT grew ~107% yoy: On the operating front, the company reported a margin
expansion of 904bp yoy to 41.9% on account of the sharp decline in other
operating expenses by 816bp yoy to 51.1% of sales. As a result, the EBITDA grew
by 38.4% yoy to Rs.38cr. Aided by a better operating performance and higher
other income, the net profit grew by ~107% yoy to ~Rs26cr.
Outlook and Valuation: We estimate Navkar 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 17.4x 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 Rs265.

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