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.
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