CMP = Rs 88 (as of June 8)
Price target: Rs 100
Result highlights
- In Q4FY2007 the overall revenues of Transport Corporation of India (TCI) grew by 18.9% year on year (yoy) to Rs292.6 crore on the back of the better performance of both the XPS and the SCM division.
- The earnings before interest and tax (EBIT) of the company grew by 61% to Rs15.7 crore yoy whereas the margin improved by 300 basis points to 10% in the quarter, driven by the SCM division's margin of 12%.
- The interest cost doubled to Rs3.12 crore from Rs1.7 crore last year whereas the depreciation provision stood flat on a sequential basis at Rs5.45 crore but increased by 41% yoy, as the company added assets in the form of warehouses and trucks.
- On the back of a better performance at the operating level, the net profit more than doubled to Rs9.42 crore.
- TCI has drawn up a capital expenditure (capex) plan of Rs440 crore for the next two to three years. The funds would be utilised for buying ships, expanding the warehouses and augmenting its truck fleet.
- The company is also in the process of forming a 50:50 joint venture with Scan Trans Holding, Denmark to conduct shipping business. It is in the initial stages of forming the joint venture and we will update you on the same once we get more information.
- The company has identified four properties covering a total area of 12.5 acre for development. The value of these properties taken together translates into Rs26 per share on diluted equity. We believe this provides significant cushion to the company's stock price.
- At the current price of Rs 88 per share, the stock is trading at 14.7x its FY2009 earnings estimate.
- Considering the bullish outlook for the company, I am upgrading its target price to Rs 100 per share.
