Scrip Code: 532349 / TCI
CMP: Rs. 90.10; Buy at current levels. Short term Target Rs. 100.00 ; Medium to Long term Target: Rs. 108; STOP LOSS – Rs. 82.90; Market Cap: Rs. 657.12 Cr; 52 Week High/Low: Rs. 110.35 / Rs. 43.95
Total Shares: 7,29,33,180 shares; Promoters : 5,05,94,440 shares – 69.37 %; Total Public holding : 2,23,38,740 shares – 30.63 %; Book Value: Rs. 55.51; Face Value: Rs. 2.00; EPS: Rs. 7.59; Dividend: 50.00 % ; P/E: 11.87 times; Ind. P/E: 15.50; EV/EBITDA: 6.18.
Total Debt: 290.36 Cr; Enterprise Value: Rs. 931.61 Cr.
TRANSPORT CORPORATION OF INDIA LIMITED: Transport Corporation of India Ltd was founded in 1958 and is based in Gurgaon, India. It was formerly known as TCI Industries Limited and changed its name to Transport Corporation of India Ltd in October 1999. Transport Corporation of India Ltd was founded in 1958 and is based in Gurgaon, India. Transport Corporation of India Ltd provides integrated supply chain and logistics solutions primarily in India. TCI came with an IPO in May 1975 with 4,80,000 equity shares of face value of Rs. 10 each offered at a premium of Rs. 10 per share. The company’s Freight division offers surface transport solutions for full truck load, less than truck load, and small and over-dimensional cargo through road and rail. Its XPS division provides door-to-door express distribution services by air, surface, and rail. The company’s Supply Chain Solutions division offers services for Auto, Retail, Telecom, Electricals, Pharmaceuticals, FMCG, and Cold Chain sectors. Its Global division provides logistics services comprising freight forwarding, custom clearance, express and courier, warehousing, transportation, and supply chain consultancy services. The company’s Seaways division provides ship management, liner, charter, agency, project handling, multi-modal, and transportation services, including container and bulk cargos from islands and ports. TCI was the first to launch several solutions in the logistics field. Its product offering includes TCI Freight, TCI XPS, TCI Supply Chain Solutions, TCI Global Logistics, TCI Seaways and TCI Foundation. The company also has two JV’s - Transystem International Pvt Limited (TLI) a joint venture between TCI and Mitsui & Co Ltd which is the sole logistics partner for Toyota Kirloskar Motors Ltd in India. TLI has been providing complete logistics solutions, from inbound transportation from suppliers across India and other countries to outbound transportation of complete built units (CBU) & spares. TCI’s second JV is Infinite Logistics Solutions Pvt Ltd (ILSPL) this JV is with CONCOR for bulk multi-modal logistics solutions by Rail and Road. TCI Limited is locally compared with Container Corporation of India Ltd, GATI India Ltd, Gateway Distriparks Ltd, Ruchi Infrastructure Ltd, Kesar Terminals & Infrastructure Ltd, Shreyas Shipping & Logistics Ltd, Blue Dart Express Ltd, Patel Integrated Logistics Ltd, Global Vectra Helicorp Ltd, SICAL Logistics Ltd and Globally compared with S Line Company Ltd of Japan, Keihin Co., Ltd of Japan, Okayamaken Freight Transportation Co., Ltd of Japan, FedEx Corp of USA, Royal Mail Plc of London, Postal Services mail Plc of London, Deutsche Post AG of Germany, PostNL N.V. of Netherlands, Hanjin Transportation Co., Ltd of South Korea, Pos Malaysia Berhad of Malaysia, Singapore Post Ltd of Singapore, Yusen Logistics Co Ltd, Hyundai Glovis Co Ltd of Korea, Atlas Air Worldwide Holdings of USA, Bpost NV-SA Brussels, Belgium, Kintetsu World Express Inc of Japan, UPS – United parcel Service Inc of USA, Fedex Corp of USA, Air transport Services Group of Ohio, Hub Group Inc of Illinois, Xpo Logistics Inc of USA, Echo Global Logistics Inc of Illinois, Uti Worldwide Inc of British Virgin Islands, Chichibu Railway Co., Ltd of Japan, Kobe Electric Railway Co., Ltd of Japan, Keifuku Electric Railroad Co., Ltd.
Investment Rationale:
Transport Corporation of India (TCI) is India’s leading integrated logistics and supply-chain solution provider, offering single-window integrated services, backed by strong multi-mode transport operations by road, rail, sea and air. The company operates in high growth segments such as express cargo & supply chain solutions. TCI has progressed from being a One Man, One Truck, One Officeset up to an extensive setup of 1000 + IT enabled offices and having a fleet of 7,000 trucks, trailers, 4 cargo ships and has reefer vehicles with a skilled workforce of 6,500 with offices in 4 countries, with an managed warehouse space of 9.75 million sq. ft., and has an ability to make deliveries in 200 countries. Today, TCI moves about 2.5 % of India’s GDP by value and is also a part of World Economic Forum’s Community of Global Growth Companies. The logistics sector presents an incredible arena of opportunity because, nearly 90 % of the market is still controlled by the unorganized sector. The size of the logistics market is just $230 billion and it is expected to grow at about 15 % CAGR for next several years, so there is no dearth of opportunity for companies seeking to bring some cost and time saving innovation to this field. The expectation of FDI in E- Commerce will be allow big-ticket MNC’s to set up JV’s so as to tackle supply-chain constraints and logistics and this makes this sector an attractive bet. The buzz on the news is that the top brass in the Government is keen to allow foreign direct investment in retail e-commerce before the end of FY 2014 and TCI, being one of the oldest players in the logistics sector with its strong distribution network across the length and breadth of the Country will definately benefit TCI . Financially, TCI has been doing well. Its ROCE is above 16 % over the past five years, TCI’s top-line has been growing at a CAGR of about 11 % while the operating profits have grown at a CAGR of about 14 %. Transport Corporation of India reported Q3FY14 numbers with revenues growing at 3 % QoQ and 4.7 % YoY to Rs. 515 crore whereas its EBITDA showed a robust growth of 14.6 % QoQ and 9.4 % YoY to Rs. 37.6 crore. Improvement in EBITDA was due to expansion in EBITDA margin by 73 bps QoQ & 32 bps YoY to 7.3 %. Consequently, PAT in the quarter also improved significantly by 10 % QoQ and 27 % YoY to Rs. 14.4 crore. Going ahead, as the focus shifts towards better margin segments like express and supply chain, it is believed that these segments will propel TCI to place itself on a higher growth orbit.
Outlook and Valuation:
Transport Corporation Of India Ltd has a Global division which provides logistics services comprising freight forwarding, custom clearance, express and courier, warehousing, transportation, and supply chain consultancy services. It has a strong vertical integration and have been gaining market share because unorganised players find it difficult to operate due to high wage cost and other procedural hurdles. TCI has shown a strong recovery driven by its supply chain and express segment, this division’s revenues grew significantly as the freight segment continued to decline. On an EBIT basis, SCS and express segment posted growth of 17 % and 26 % QoQ to Rs. 7.5 crore and Rs. 12.1 crore, respectively. Going ahead, it is believed that SCS and express segments possess massive growth potential. With revenue contribution getting skewed towards SCS and express segment from freight division, it is believed that the margins will improve further, going ahead. Also, as SCS and express businesses are highly EPS accretive as against its freight segment, and it can be anticipated that it can post an earnings CAGR of 13 % over FY14E-16E against CAGR of 11 % over FY11-13. The freight segment revenue growth remained flattish YoY to Rs. 194 crore whereas its contribution to total sales for Q3FY14 declined to 38 % from 39 % in Q2FY14. Further, at the EBIT level, the freight segment contributes a meagre Rs. 0.7 crore. However, the strong pick-up in SCS and express segment revenue by 11 % and 6 % YoY, respectively, supported total revenue growth of 4.6 % YoY. Another heartening factor has been the shift of revenue mix towards high return SCS and express business leading to contribution from these segments to 28 % and 30 %, respectively, for Q3FY14. Further, the shipping segment continues to contribute in the range of around 5 – 6 % to revenue for the quarter posting growth of 28 % YoY. There is a conscious effort to shift the business mix from the low margin freight business to the high margin SCS and XPS business over a long period to improve the EBITDA margin of the company. TCI is trading at a P/E of 13 times, which is not expensive when you compare it with the P/E of its peers like Gateway Distriparks which trades at 9 x, Container Corporation at 15 x, AllCargo Logistics at 7.5 x, Blue Dart at 40 x etc. At the current market price of Rs. 90.10, TCI is trading at a PE of 10.98 x FY14E and 9.58 x FY15E respectively. The company can post Earnings per share (EPS) of Rs. 8.20 in FY14E and Rs. 9.40 in FY15E. One can buy TCI with a target price of Rs. 100 for the shorter term and for Medium to Long term investment it would be Rs. 108.00.
KEY FINANCIALS
FY13
FY14E
FY15E
FY16E
SALES (₹ Crs)
2,130.50
2,053.00
2,195.80
2,415.90
NET PROFIT (₹ Cr)
69.50
59.40
68.10
86.00
EPS (₹)
9.50
8.20
9.40
11.80
PE (x)
9.60
11.30
9.80
7.80
P/BV (x)
0.20
0.20
0.20
0.20
EV/EBITDA (x)
5.40
6.20
5.50
4.80
ROE (%)
15.90
12.30
12.70
14.10
ROCE (%)
25.10
19.20
19.70
21.20
I would buy TRANSPORT CORPORATION OF INDIA LTD for Medium to Long term for target of Rs. 108 and for the shorter term the target would be Rs. 100.00. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of ₹ 82.90 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here
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