Technology

Navkar Corporation (Navkar) reported a mixed set of numbers for 3QFY2016.
The consolidated top-line grew by ~5% yoy. On the operating front, the company
reported a margin contraction on account of higher operating and employee
expenses. However, the net profit grew by ~83% yoy (after factoring in forex
losses) due to higher other income and lower interest related expenses.
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
due to a higher mix of imports. The commodity mix comprised of agro products
(~43%), hazardous products (~14%) while other product categories accounted
for the balance ~43%.
PAT grew ~83% yoy despite operating margin contraction: On the operating
front, the company reported a margin contraction of 154bp yoy to 42.0% on
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
due to higher other income and lower interest related expenses.
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.

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