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Healthy volumes & margins boost CFS profits
With container volumes steady at the ports and CFS
players’ ability to pass on higher rates and maintain
healthy margins, we remain positive on container based
logistics players with a Buy rating on Gateway
Distriparks (GDL) and Allcargo Global Logistics.
Container volumes at 12 major ports remained stable
during FY12, growing at a modest 3.0% to 7.8mn TEUs
after increasing by 9.4% in FY11 to 7.5mn TEUs. We
estimate container volumes to grow at 8.3% to 8.4mn
TEUs for FY13E. Transport Corporation of India (TCI) is
riding on the growth in its supply chain and express
logistics division, helping its revenue grow higher than
that of the industry.
Container volumes stable: Container traffic at the 12
major ports remained stable during Q4FY12. Container
volumes grew 0.2% YoY to 1.93mn TEUs during Jan-Mar
2012, compared to 3.0% in FY12. Volumes at JNPT grew
1.3% YoY to 1.08mn TEUs in Q4. The port handled a
total of 4.32mn containers in FY12, its best annual
performance in the last 5 years.
Total port traffic down 7.5% YoY: Total port traffic
remained lacklustre with a decline of 7.5% in Q4FY12 on
the back of a sharp drop in iron-ore volumes. Iron ore
volumes declined 54% YoY in Q4 to 12.8mn tonnes. POL
volumes increased 4.1% YoY to 47.3mn tonnes, while
coal thru-put increased 6.9% YoY to 20.4mn tonnes.
EXIM trade too stable: India’s exports remained
sluggish but its imports continued its robust growth
during Q4. While exports grew just 7.2% YoY in value
terms during Jan-Feb 2012, imports increased 20.4%
YoY in the same period.
Domestic industrial activity: India’s Index of Industrial
Production (IIP) recovered from its lows reached in Oct
2011. Following a marginal 1.1% growth in Q3FY12, IIP
expanded by 6.8% in January 2012, led by a sharp 42.1%
expansion of consumer non-durables, while the rest of
the IIP index contracted by 1.2%.
GDL and Allcargo - Top picks in the sector: Gateway
Distriparks and Allcargo are our top picks in the logistics
space. We have a Buy rating on both with a target of
Rs190 and Rs220 respectively. We believe Concor is
looking fully valued at the current level and maintain
Hold with a target of Rs1,015. We also maintain our Buy
rating on TCI (target price Rs96).
Allcargo Global (Rating – Buy; Target Price – Rs220)
Consolidated revenue is likely to increase 32.4% YoY to Rs9,684mn, primarily led by higher
volumes in the CFS and MTO businesses. Operating profit is expected to grow 33.9% YoY to
Rs1,201mn, while margins are expected to remain flat at 12.4% (up 14bp YoY). Volumes in the
CFS (container freight station) business are likely to grow 12.4% YoY to 66,960 TEUs while
average realisation is likely to remain flat (up 0.6% YoY) at Rs10,784 per container.
The global MTO (multi-modal transport operation) business (ECU Line) volume is expected to
increase 16.3% YoY to 64,409 TEUs and the domestic MTO business volumes are likely to grow
at 14.5% YoY to 7,301 containers.
Net profit is expected to grow 28.8% YoY to Rs642mn while net margins are likely to remain flat
(down 18bp YoY) at to 6.6%.
Container Corp of India (Rating – Hold; Target Price – Rs1,015)
We expect standalone revenue to increase 5.6% YoY to Rs10,511mn, mainly led by volume
growth in the EXIM segment. EXIM segment’s volumes are expected to improve 7.1% YoY to
555,034 containers, while domestic business volumes are likely to decline 13.9% YoY to 120,031
containers.
Operating profit is likely to grow 10.0% YoY to Rs2,564mn. Operating margins are likely to
improve 97bp YoY to 24.4%. While Exim segment’s EBIT is expected to grow 5.0% YoY to
Rs2,022mn, domestic EBIT is likely to contract 19.7% YoY to Rs144mn mainly on the back of cost
pressure and inability to pass on the increased haulage charges.
Gateway Distriparks (Rating – Buy; Target Price – Rs190)
GDL’s standalone CFS revenue is expected to remain flat; up 2.3% YoY to Rs541mn. Net profit is
likely to decline 21.1% YoY to Rs211mn on the back of higher taxes as the tax holiday period for
Mumbai CFS got over in FY11.
We expect the consolidated total income (revenue + other income) to grow 14.7% YoY to
Rs1,961mn and operating profit by 14.9% YoY to Rs639mn. Consolidated operating margins are
likely to remain flat at 32.6%.
Container volume at the Mumbai CFS is likely to grow 15.3% YoY to 59,340 TEUs, while average
realisation is expected to be higher by 41.3% to Rs10,584 per container. The higher realisation is
expected to result in 12pp YoY increase in Mumbai CFS’ margins to 59.6%.
The rail subsidiary, Gateway Rail Freight (GRFL), is expected to register 17.6% YoY revenue
growth to Rs999mn. Container rail volumes are expected to increase 17.4% YoY to 43,227 TEUs,
while average realisations are likely to remain flat at Rs23,100 per container.
Transport Corporation (Rating – Buy; Target Price – Rs96)
TCI’s standalone revenue is expected to remain flat (up 0.3% YoY) at Rs4,805mn, as growth in
the express and supply chain business is negated by the decline in the transportation segment.
Operating profit is likely to decline 8.8% YoY to Rs359mn, while margins are likely to contract
75bp YoY to 7.5%. Net profit is likely to fall 4.8% YoY to Rs121mn on the back of decline in
freight business’ margins and higher tax. Net margins are likely to contract 14bp YoY to 2.5%.
While the revenue of express division is expected to grow 9.2% to Rs1,309mn and that of supply
chain solution (SCS) division by 2.6% YoY to Rs1,203mn, the freight revenue is likely to decline
5.7% YoY to Rs2,033mn. The express’ PBIT is expected at Rs109mn, a growth of 40.2% YoY with
PBIT margins of 8.3%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Healthy volumes & margins boost CFS profits
With container volumes steady at the ports and CFS
players’ ability to pass on higher rates and maintain
healthy margins, we remain positive on container based
logistics players with a Buy rating on Gateway
Distriparks (GDL) and Allcargo Global Logistics.
Container volumes at 12 major ports remained stable
during FY12, growing at a modest 3.0% to 7.8mn TEUs
after increasing by 9.4% in FY11 to 7.5mn TEUs. We
estimate container volumes to grow at 8.3% to 8.4mn
TEUs for FY13E. Transport Corporation of India (TCI) is
riding on the growth in its supply chain and express
logistics division, helping its revenue grow higher than
that of the industry.
Container volumes stable: Container traffic at the 12
major ports remained stable during Q4FY12. Container
volumes grew 0.2% YoY to 1.93mn TEUs during Jan-Mar
2012, compared to 3.0% in FY12. Volumes at JNPT grew
1.3% YoY to 1.08mn TEUs in Q4. The port handled a
total of 4.32mn containers in FY12, its best annual
performance in the last 5 years.
Total port traffic down 7.5% YoY: Total port traffic
remained lacklustre with a decline of 7.5% in Q4FY12 on
the back of a sharp drop in iron-ore volumes. Iron ore
volumes declined 54% YoY in Q4 to 12.8mn tonnes. POL
volumes increased 4.1% YoY to 47.3mn tonnes, while
coal thru-put increased 6.9% YoY to 20.4mn tonnes.
EXIM trade too stable: India’s exports remained
sluggish but its imports continued its robust growth
during Q4. While exports grew just 7.2% YoY in value
terms during Jan-Feb 2012, imports increased 20.4%
YoY in the same period.
Domestic industrial activity: India’s Index of Industrial
Production (IIP) recovered from its lows reached in Oct
2011. Following a marginal 1.1% growth in Q3FY12, IIP
expanded by 6.8% in January 2012, led by a sharp 42.1%
expansion of consumer non-durables, while the rest of
the IIP index contracted by 1.2%.
GDL and Allcargo - Top picks in the sector: Gateway
Distriparks and Allcargo are our top picks in the logistics
space. We have a Buy rating on both with a target of
Rs190 and Rs220 respectively. We believe Concor is
looking fully valued at the current level and maintain
Hold with a target of Rs1,015. We also maintain our Buy
rating on TCI (target price Rs96).
Allcargo Global (Rating – Buy; Target Price – Rs220)
Consolidated revenue is likely to increase 32.4% YoY to Rs9,684mn, primarily led by higher
volumes in the CFS and MTO businesses. Operating profit is expected to grow 33.9% YoY to
Rs1,201mn, while margins are expected to remain flat at 12.4% (up 14bp YoY). Volumes in the
CFS (container freight station) business are likely to grow 12.4% YoY to 66,960 TEUs while
average realisation is likely to remain flat (up 0.6% YoY) at Rs10,784 per container.
The global MTO (multi-modal transport operation) business (ECU Line) volume is expected to
increase 16.3% YoY to 64,409 TEUs and the domestic MTO business volumes are likely to grow
at 14.5% YoY to 7,301 containers.
Net profit is expected to grow 28.8% YoY to Rs642mn while net margins are likely to remain flat
(down 18bp YoY) at to 6.6%.
Container Corp of India (Rating – Hold; Target Price – Rs1,015)
We expect standalone revenue to increase 5.6% YoY to Rs10,511mn, mainly led by volume
growth in the EXIM segment. EXIM segment’s volumes are expected to improve 7.1% YoY to
555,034 containers, while domestic business volumes are likely to decline 13.9% YoY to 120,031
containers.
Operating profit is likely to grow 10.0% YoY to Rs2,564mn. Operating margins are likely to
improve 97bp YoY to 24.4%. While Exim segment’s EBIT is expected to grow 5.0% YoY to
Rs2,022mn, domestic EBIT is likely to contract 19.7% YoY to Rs144mn mainly on the back of cost
pressure and inability to pass on the increased haulage charges.
Gateway Distriparks (Rating – Buy; Target Price – Rs190)
GDL’s standalone CFS revenue is expected to remain flat; up 2.3% YoY to Rs541mn. Net profit is
likely to decline 21.1% YoY to Rs211mn on the back of higher taxes as the tax holiday period for
Mumbai CFS got over in FY11.
We expect the consolidated total income (revenue + other income) to grow 14.7% YoY to
Rs1,961mn and operating profit by 14.9% YoY to Rs639mn. Consolidated operating margins are
likely to remain flat at 32.6%.
Container volume at the Mumbai CFS is likely to grow 15.3% YoY to 59,340 TEUs, while average
realisation is expected to be higher by 41.3% to Rs10,584 per container. The higher realisation is
expected to result in 12pp YoY increase in Mumbai CFS’ margins to 59.6%.
The rail subsidiary, Gateway Rail Freight (GRFL), is expected to register 17.6% YoY revenue
growth to Rs999mn. Container rail volumes are expected to increase 17.4% YoY to 43,227 TEUs,
while average realisations are likely to remain flat at Rs23,100 per container.
Transport Corporation (Rating – Buy; Target Price – Rs96)
TCI’s standalone revenue is expected to remain flat (up 0.3% YoY) at Rs4,805mn, as growth in
the express and supply chain business is negated by the decline in the transportation segment.
Operating profit is likely to decline 8.8% YoY to Rs359mn, while margins are likely to contract
75bp YoY to 7.5%. Net profit is likely to fall 4.8% YoY to Rs121mn on the back of decline in
freight business’ margins and higher tax. Net margins are likely to contract 14bp YoY to 2.5%.
While the revenue of express division is expected to grow 9.2% to Rs1,309mn and that of supply
chain solution (SCS) division by 2.6% YoY to Rs1,203mn, the freight revenue is likely to decline
5.7% YoY to Rs2,033mn. The express’ PBIT is expected at Rs109mn, a growth of 40.2% YoY with
PBIT margins of 8.3%.
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