Summary of Contents
STOCK UPDATE
Transport Corporation of
India
Cluster:
Cannonball Recommendation: Buy Price target: Rs86 Current
market price: Rs62
Results ahead of our expectations
Result highlights
-
The Q3FY2007 net profit of Transport
Corporation of India (TCI) registered a year-on-year (y-o-y)
growth of 53.65% to Rs8 crore, in line with our expectations.
-
The net revenues (excluding trading revenues)
grew by 32.7% year on year (yoy) to Rs257.8 crore on the back of a
30.6% y-o-y growth in the combined revenues of the transport and
supply chain divisions to Rs178.6 crore.
-
The earnings before interest, tax, depreciation
and amortisation (EBITDA) grew by 59% yoy to Rs18.3 crore on
account of a significant decline in its raw material costs arising
from the closure of its petrol pumps. Consequently the EBITDA
margins grew by 140 basis points yoy to 6.6%.
-
The profit before interest and tax (PBIT)
margins in the transport and express cargo (XPS) divisions
improved by 70 basis points to 3.4% and 40 basis points to 8.3%
respectively on account of higher capacity utilisation of the
company's fleet whereas the margins in the shipping division
declined on account of an increase in the fuel prices.
-
The net profit at Rs8 crore grew by 54% yoy
whereas the net margins improved by 80 basis points yoy to 2.9%.
-
To capitalise on the growth opportunity, the
company has lined up a huge capital expenditure (capex) plan of
Rs430 crore to be implemented over the next four years. The capex
plan broadly includes Rs150 crore for setting up warehouses, Rs120
crore for acquiring trucks and Rs100 crore for buying ships.
-
The company plans to fund this capex through
debt, internal accruals and fresh equity in equal measures. The
equity issue is expected to be undertaken in two parts. The first
equity issue of close to Rs75 crore will be done in the next
couple of months. Hence we have assumed that the first tranche of
equity will be raised at Rs65 per share in FY2008 whereas the
second tranche of Rs75 crore will be raised at Rs75 per share in
FY2009. Consequently we have adjusted our numbers factoring in the
same.
-
Considering the company's focus towards
high-margin XPS and supply chain divisions as well as higher
volumes from the transport division, we are upgrading our FY2007
and FY2008 profit after tax (PAT) estimates by 4.9% to Rs32.1
crore and 8.8% to Rs44.2 crore respectively. On the revised
numbers, the earnings per share (EPS) would stand at Rs4.8 per
share for FY2007 and Rs5.6 per share for FY2008.
-
We expect TCI's net revenues to grow at a
compounded annual growth rate of 21% over FY2006-08 to Rs1,330
crore. The net profit is estimated to register a 28% CAGR growth
to Rs44.2 crore by FY2008. At the current market price of Rs62,
the stock trades at 13x FY2007E earnings and 11x FY2008E earnings.
Considering the bullish outlook for the company as well as higher
profitability, we maintain our Buy recommendation with a price
target of Rs86.
Television Eighteen
India Cluster: Emerging Star Recommendation:
Buy Price target: Under review Current market price: Rs556
Web-18 expands, Network-18 to raise
funds Adding another feather to its cap Web-18, the
Internet arm of TV-18, has acquired a majority stake in Bigtree
Entertainment, the industry leader in movie and entertainment
ticketing. The acquiree specialises in ticket selling services to
end consumers and provides the necessary software, processes,
systems, door delivery options, cash collection, warehousing and
accounting services. Its software "Vista Cinema Ticketing" includes
box office ticketing, concessions management, web ticketing, mobile
ticketing, loyalty management software, film programming, bar code
ticketing, voucher management etc. Its customer base includes major
cinema chains such as Inox, PVR, Fame Adlabs and Fun Republic among
others and spans across 35 cities in India. The company currently
handles over 2.5 million ticketing transactions annually for all
major exhibition chains/centres across the
country. |