Arshiya International: On Fast Track; Growth Triggers Abound :: Karvy

On Fast Track; Growth Triggers Abound
Arshiya International (ARST) Q1FY13 consolidated PAT grew 47% YoY
(+13% QoQ) to Rs346bn (10% ahead of our estimates). Revenues grew 54%
YoY (+9% QoQ) to Rs3.4bn driven by strong growth across all three
business segments. Rise in high margin FTWZ business and better asset
utilization across all the verticals boosted EBITDA growth to 72% YoY
(10% ahead our est) and 15% QoQ. However, PAT growth got moderated
on account of high capital charges on capacity commissioning and capex
related debt levels.

Buy ARSHIYA INTERNATIONAL:: Kotak Securities (PDF link)

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http://www.kotaksecurities.com/pdf/dmb/MorningInsight23022012.pdf


ARSHIYA  INTERNATIONAL
PRICE: RS.154 RECOMMENDATION: BUY
TARGET  PRICE:  RS.185 FY13E P/E: 6.6X


Arshiya (ARST) starts commercial operations at Khurja - we are
positive on company's FTWZ business
ARST has started its Khurja FTWZ with 2 warehouses and we estimate the
company to ramp it up to 4 by end of FY13E. The company is already
operating 4 warehouses at Panvel FTWZ and we estimate the company to
ramp it up to 8 warehouses by end of FY13E. We also expect the VAS to
rental ratio to improve from current 1x to 1.5x by FY13E and further to 2x by
FY14E. We are positive on the company's FTWZ business and estimate
revenues for the segment to grow at more than 100% CAGR to Rs 3.2 bn
over FY11 to FY13E, with the share of the segment increasing from 3% in
FY11 to ~25% in FY13E. In the rail segment the company operates 16 rakes
currently which they would ramp up to 20 by end of FY13E. The company
also intends to take about 10 rakes on lease during the same period. The
company wants to integrate its entire rail operations with its logistics
business and FTWZ business and run these rakes primarily on the domestic
segment. The company continues to grow steadily in its core third party
logistics (3PL) businesses. The stock at CMP of Rs.154 trades at 6.6 times
FY13E earnings, below the average one year forward trading multiple of
peer companies of 10x. We expect the company to deliver revenue CAGR of
24% over FY11 to FY13E to ~ Rs 12.7 bn with improvement in operating
margins from 19.4% in FY11 to 24.2% in FY12E and 26.9% in FY13E. With
improvement in margins and benefits of aggressive capex accruing to the
company going ahead, we expect the return ratios of the company to
improve. High leverage, execution delays and poor acceptability of the key
FTWZ concept are some of the pitfalls and can be a drag for the company.
Consequently we value the company at 25% discount to the one year
forward multiple of peer group companies in the Logistics space which
comes at Rs 185. The discount captures the risks on account of the high
leverage position of the company. We rate the stock BUY with a one year
price target of Rs.185.

Accumulate ARSHIYA INTERNATIONAL :: price target of Rs 185. :: Kotak Securities

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ARSHIYA INTERNATIONAL
PRICE: RS.165 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.185 FY13E P/E: 6.6X
Strong operational performance in Q3FY12-FTWZ grows at
healthy pace
Arshiya has reported its Q3FY12 net profit at Rs 345 million (+65% YoY).
This was on account of increased share of FTWZ revenues in the overall
revenues which has increased from 3% in Q3FY11 to 16% in Q3FY12. FTWZ
revenues have grown from Rs 60 mn in Q3FY11 to Rs 443 mn in Q3FY12. As
FTWZ is a high margin business, the increased share has helped the overall
margins expand from 19.9% in Q3FY11 to 25.7% in Q3FY12. The company
currently operates 4 warehouses at Panvel FTWZ and we estimate the
company to ramp it up to 8 warehouses by end of FY13E. ARST has also
started its Khurja FTWZ in Q4FY13E with 2 warehouses and we estimate the
company to ramp it up to 4 by end of FY13E. We also expect the VAS to
rental ratio to improve from current 1x to 1.5x by FY13E and further to 2x by
FY14E. In the rail segment the company operates 16 rakes currently which
they would ramp up to 20 by end of FY13E. The company also intends to
take about 10 rakes on lease during the same period. Rail segment has
reported 70% YoY growth in revenues with EBIT margins expanding to
15.5%. The company wants to integrate its entire rail operations with is
logistics business and FTWZ business and run these rakes primarily on the
domestic segment. The company continues to grow steadily in its core third
party logistics (3PL) businesses. Total revenues have grown to Rs 2.7 bn
(+28% YoY). The stock at CMP of Rs 165 trades at 6.6 times FY13E earnings,
below the average one year forward trading multiple of peer companies of
10x. We expect the company to deliver revenue CAGR of 24% over FY11 to
FY13E to ~ Rs 12.7 bn with improvement in operating margins from 19.4%
in FY11 to 24.2% in FY12E and 26.9% in FY13E. With improvement in
margins and benefits of aggressive capex accruing to the company going
ahead, we expect the return ratios of the company to improve. High
leverage, execution delays and poor acceptability of the key FTWZ concept
are some of the pitfalls and can be a drag for the company. Consequently
we value the company at 25% discount to the one year forward multiple of
peer group companies in the Logistics space which comes at Rs 185. The
discount captures the risks on account of the high leverage position of the
company. We rate the stock Accumulate with a one year price target of Rs
185.

BUY Arshiya International, TARGET PRICE: RS.185:: Kotak Sec,

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ARSHIYA INTERNATIONAL (ARST)
PRICE: RS.122 RECOMMENDATION: BUY
TARGET PRICE: RS.185 FY13E: P/E: 5.0
We initiate coverage of Arshiya International (ARST) with a BUY rating and a
12- month PT of Rs.185 based on 7.5x FY13E P/E. ARST is in the midst of a
transformation from a 3PL player to becoming an integrated service
provider. Its Free Trade Warehousing Zone (FTWZ) foray, if successful, can
lead to a significant re-rating of the stock even above our target valutions.
We expect 24% sales CAGR over FY11-13E driven by ~Rs.5 bn cumulative
revenue from FTWZs and an increasing presence in container haulage and
3PL logistics. Adjusted PAT is expected to increase at a 34% CAGR driven by
a 750-bps expansion in EBITDA margin as high margin FTWZ business
expands and contributes about 25% to revenues in FY13E from 3% in FY11.
We expect sizeable value accretion from the FTWZ business from FY13E. We
believe a 25% discount to the one year forward multiple of peer group
companies adequately factors in concerns on account of high leverage.
Key investment argument
q FTWZ is a unique business model new in India and adopted by ARST.
FTWZ is a deemed foreign territory. The unit operating within the zone is given
special status with various fiscal and non-fiscal benefits. These benefits include
various tax exemptions and various value added services at relatively low cost
which leads to savings for the clients in the form of low working capital
requirement and reduced logistics cost. ARST is pioneering the FTWZ concept in
India and after successfully commissioning its Mumbai FTWZ in 3Q FY11, the
company is on track to start commercial operations at its Khurja FTWZ by
4QFY12. The company also has plans to add more FTWZs in future in central,
eastern and southern regions of the country.
q Ramping up of the rail business. ARST has a category 1 container rail licence
and a fleet of 15 rakes which primarily runs on domestic segment. Company
intends to buy another 5 rakes and lease 10 rakes over the next 24 months to
support its rail business and also to complement its FTWZ and Logistics business.
Company has already spent more than Rs 4 bn on rail license, rakes and Khurja
Distriparks and would be spending another Rs.1 bn in the next 24 months. We
estimate the rail business to effectively complement the FTWZ and logistics
business with revenues for the segment growing from ~Rs 1.7 bn in FY11 to
~Rs.2.3 bn in FY13E.
q ARST has an integrated business model which helps attract customers.
ARST, with its rail infrastructure network combined with the FTWZ has emerged
as a one-stop-shop to cater to the point-to-point logistics requirement of the
customers. The company has already started its first FTWZ in Panvel, near
Mumbai which would be followed by Khurja, near Delhi in Q4FY12. The
company intends to have FTWZ in every region of the country and all these
FTWZs would be well connected with the rail infrastructure of the company
providing customers with complete logistics solution. Such an arrangement is
very critical today to attract customers, retain them and command better rates.
q We expect 24% revenue CAGR to ~Rs 12.7 bn over FY11-13E led by FTWZ.
Strong initial performance at Mumbai FTWZs gives us visibility of about Rs.3.2 bn
revenue until FY13E as the company benefits from strong entry barriers in the
space. In addition, a differentiated strategy of entering long-term charters with
clients ensures a higher utilization rate in the container rail business, which is
expected to post a 15% CAGR while the third party logistics business is
estimated to grow at 7% CAGR over FY11-13E.

Arshiya International Limited (AIL) Target Price: `185.00 :: Omi Advisors 2012 Ideas

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About the Company
Arshiya International is an Indian company and a provider of integrated supply chain and logistic infrastructure solutions. The
company has multinational operations in the logistics and supply chain management space. The business of AIL is divided into seven
verticals and they are:
Rail Infrastructure
Domestic Distriparks
Logistics
Supply Chain Management
Transport & Handling
Information Technology
Investment Rationale
In the last fiscal the company has started its first FTWZ at Panvel, Mumbai. This is the first of its kind in India. Currently the company
is planning to setup FTWZ in Chennai, Nagpur and also in eastern part of the country with an investment of ` 6-7bn in each. To
complement its FTWZ network, AIL is planning to have five Pan-India Domestic Distriparks. The first one is expected to be

operational soon near Delhi. In Delhi the company will be launching an integrated facility which includes a FTWZ and a domestic
Distripark. All these will be linked with the largest private trade terminal which is going to be developed by the company.
To double its rail capacity and to take it to 30 rakes, AIL will invest ` 1.5bn in the current fiscal. These rakes will be mainly used to
carry overseas cargo. The rail business will connect with the FTWZs of the company. The company is also planning to operate on a
couple of new routes like Uttaranchal to Kochi, North to Chennai, and Chennai to Bangalore. The focus will be on export-import
routes emerging from FTWZs.
Valuation
The stock is currently trading at a P/E of 5.00x for FY13E and 4.10x for FY14E. At ` 128 per share, it trading at 0.74x to the book
value of FY13E and 0.63x to the book value of FY14E. Consolidated revenue and net profit are expected to grow at a CAGR of 30%
and 35% over FY11 to FY14E. We recommend investors to buy this scrip with a target price of ` 185 per share.

Arshiya International ltd ; Target – Rs 210 ::Way2Wealth :: Diwali Picks 2011

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History and Business Model
Arshiya International Ltd (AIL)is the flagship company of Arshiya group, having a
10 years lineage in logistics. It is a fast emerging end-to-end service and solution
provider in logistics and supply chain management. Arshiya has pioneered the
FTWZ (Free Trade Warehousing Zone) concept in India, with the zones to act as
trading and warehousing hubs for international trade. It has entered into various
verticals such as FTWZs, Domestic Distriparks, Rail Business etc.
Financials
The Company has been growing at a steady rate with revenue and profit CAGR of
35% and 36% resp. over FY07-FY11. For the year FY11, net sales of Rs 821.5
crores was reported, i.e. a Y-o-Y increase of 56%. Net profit decreased to Rs
82crores over a net Profit of Rs 98crores reported in FY10, down by 16%. Net
sales Q1FY12 grew by 26% at Rs 223 crores against Rs 177crores in Q1FY11.
The change in asset capitalization policy of the company has led to a lower interest
expense thus impacting the PAT positively. Mumbai FTWZ’s phase 1, comprising
of 3 warehouses, was operational at a utilization rate of 100% in the entire quarter.
As per company expectations, one warehouse would get added in Q2FY12 and
another 3-4 will get added by FY12 end.
We expect consolidated revenue to grow at a CAGR of 36% over FY11-FY13E
supported by commencement of two FTWZ in FY12, growth in logistics and supply
chain management business, and addition of new rakes leading to expansion of
capacity in rail business.
Growth Drivers
• Complete Logistics Provider: Arshiya has entered into various verticals such
as FTWZs, Domestic Distriparks, Rail Business etc thus presenting itself as a
complete logistics solution provider.
• First mover in FTWZ space in India: Arshiya is pioneering the FTWZ concept
in India, with the zones to act as trading and warehousing hubs for international
trade. The company had taken initiative to develop India’s first FTWZ at Panvel,
Mumbai spanning across 165 acres. It is in process of setting up second FTWZ
at Delhi, followed by Nagpur and two more at South and East. These five
strategically located FTWZs across India will bring about a transformation in
Indian logistics.
• Rail business holds promise: Arshiya currently operates 15 railway rakes and
it plans to expand this capacity to 30 by FY13E. Arshiya has already planned an
investment outlay of Rs 626crores for its Railway Infrastructure projects.
• Distripark business: Arshiya’s first domestic distripark is located at Khurja.
Phase I of Khurja – distripark is expected to commence its operation in Q3FY12
and phase II construction is scheduled towards completion by Q1FY14E. The
location of Khurja (near Delhi) is of strategic importance as it lies at the junction
of the Eastern and Western freight corridors. Arshiya has also planned to set up
four more domestic distriparks on the same lines.
• Synergies between verticals: Its own FTWZs and domestic distriparks will
serve as captive cargo consolidation and aggregation hubs in India’s key
markets providing captive cargo for Arshiya Rail Infrastructure to move between
the infrastructure hubs. On commencement of operations of all the FTWZs, wellconnected
by rail infrastructure, the complete picture of the entire logistics
offerings by the company would get clearer.
Valuations:
At CMP of Rs 159, stock trades at PE of 10.3x and 5.0x its FY12E and FY13E
earnings of Rs 15.4 and Rs 31.6 respectively as per Bloomberg estimates. Arshiya
is the first Indian company to focus on the higher logistics costs in India and work
towards providing a solution for the same by setting up FTWZs. The company is
establishing itself as a complete logistics provider with no notable peer comparison
available. We believe Arshiya is in a sweet spot expect it to provide good
investment opportunity.
Technicals
This scrip has seemingly formed a base near 120-140 zone. It is now having stiff
resistance at 170 and surpassing this will open way till 38% retracement levels of
210 in short term. The drastic fall from top of 360 has been arrested near to 120.
The volume activity at lows provides confidence and activities of new bulls.


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Way2Wealth :: Diwali Picks 2011

Buy Arshiya International Ltd.; target of `258 - Latin Manharlal Securities

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COMPANY PROFILE

Arshiya International Ltd (AIL), a flagship company of the Arshiya Group is an Integrated Supply Chain and Logistics Infrastructure Solutions provider. The company has multinational operations in the logistics and supply chain management space and is currently involved in the phased investment of ~ US$ 1.5 bn towards creating pioneering logistics infrastructure in India.

INVESTMENT POSITIVES

→      Only Player in India operating Free Trade Warehousing Zones (FTWZ):

→      Regular source of Income – Rental Income + Value Added Service charges:

→      Rail Infrastructure – expansion largely on track:

→      Road transportation business – the missing link in the supply chain now on cards

→      Plans 6^th FTWZ at Mundra SEZ

OUTLOOK AND VALUATION

The future prospect of the logistics sector seems to be bright and is sure to witness exponential growth in the coming years. AIL is well placed in the logistic infrastructure domain to reap the benefits of the likely investment in this sector. At the CMP of `213, the stock is trading at 15x and 12x its FY11E and FY12E EPS of `13.88 and `18.41 respectively. We recommend BUY on the stock with a price target of `258 providing an upside of 21% from the current levels.