Sushil Finance wishes you and your family a very Happy Diwali and a Prosperous New Year ahead

TransportCorporationofIndiaLtd.
STOCKDATA
Recommendation ReutersCode BloombergCode BSECode NSESymbol FaceValue SharesOutstanding* BUY
TCIL.BO TRPCIN 532349 TCI Rs.2 72.8mn

MarketCap. Rs.3,639mn

52WeekH/L Rs.90/44

CMP Rs.50

TargetPrice Rs.73

Avg.Daily 2,714shares Volume(6m) PricePerformance(%) 1M 3M 6M 4 4 (5) 200DaysEMARs.55

*OnfullydilutedequityShares

SHAREHOLDING(%)
Promoters FII FI/Bank BodyCorporate Public&Others 69.37 11.54 0.08 3.73 15.28

Emerging trends in the Indian logistics space and shift towards organized logistics: The Indian logistics space is 90% commanded by the unorganized segment. Over the past few years, this sector is experiencing a shift towards the organized segment. It is witnessing the emergence of new concepts in automated warehousing, third party logistics, express cargo and logistics parks. The industrial warehousing is expected to be driven by rising domestic and exportimport freight volumes, investments in infrastructure, organized retail, focus towards manufacturing and the anticipated implementation of goods and services tax. Additionally, other aspects such as third party logistics and logistics parks are also gaining significance in the Indian logistics space thereby promising relatively lower costs and smoother connectivity to multiple markets, going forward. Growing investments in infrastructure and rising attention towards logistics: The Indian logistics sector which is said to have a market size of nearly $230 bn, has been growing at 810%. According to various agencies, it is expected to grow at ~15%, once the capex cycle revives. However, the cost of logistics in the country currently stands at roughly 13% of GDP as compared to the usual 89% that prevails in the developed economies. The total consumption expenditure is expected to jump threefolds to $3,600 bn by 2020 largely driven by food, housing and consumer durables. We believe, factors including shift from unorganized to organized, FDI in retail and ecommerce, increasing industrial activities, growing exports and imports, planned expenditure towards infrastructure and rising demand for costefficiencies and effective operations by the corporates promises for a consistent evolution of the Indian logistics space. Investment Thesis: The company currently trades at 5.2x of FY13 EPS (Rs.9.6) and 4.1x of FY15 EPS of Rs.12.1. The debtequity ratio stands at comfortable 0.71x; we expect the company to register topline of Rs.25,406 mn in FY15 with 3.5% of net margin that translates into an EPS of Rs.12.1 as against Rs.9.6 in FY13. We believe, the current valuations provide a decent margin of safety and the current investments promises robust growth going forward, thereby, presenting a lucrative investment opportunity at these levels. In addition, the company has never missed out on dividend payout in last 13 years. For past two years, the company has increased its dividend payout to 50%.
EBITDA (Rs.mn)
1,564 1,737 1,866 2,210

Y/EMar (Consol.) FY12 FY13 FY14E FY15E

Revenues (Rs.mn)
19,538 21,305 23,015 25,406

RPAT (Rs.mn)
595 695 781 882

NPM (%)
3.0 3.3 3.4 3.5

REPS* (Rs.)
8.2 9.6 10.7 12.1

PER (x)
6.1 5.2 4.7 4.1

P/S (x)
0.2 0.2 0.2 0.1

P/BV (x)
1.0 0.8 0.7 0.6

ThisreportbasedonTechnoFundaResearchandourView/TargetPricehasbeenderivedaccordingly.Pleaserefertothedisclaimeronthelastpage.

November01,2013 2

TransportCorporationofIndiaLtd. CompanyOverview

Founded by Mr. Prabhu Dayal Agarwal in Kolkata during 1958, Transport Corporation of India Ltd. (TCIL) has now evolved into a leading multimodal (road, rail, air, sea) integrated supplychain and logistics solutions provider in the global cargo transportation. With continuous and strategic diversification in value added and new areas of logistics, customer centricapproach and extensive infrastructure, TCIL developed an expertise over these five decades. The company now through its more than 1,400 branches operates with a fleet of 7,000 vehicles, 9.75 mn sq.ft. of warehousing space and a skilled work force of 6,500 with 20,000 outsourced positions while covering over 17,000 positions in the country. Moreover, the company has got a strong distribution network provides access to large and growing aftermarket. The other group companies include TCI Industries and TCI Developers which got demerged and listed during the course of time. The group which achieved a turnover of Rs.10,000 mn in 2006 doubled the turnover over the next five years and reaching a topline mark of Rs.22,000 mn in 2012. TCIL reports its revenues under five business segments namely TCI Seaways, TCI Freight, TCI Supply Chain Solutions, TCI XPS and TCI Global. The key management team which is headed by the Chairman, Mr. S.M. Datta is as follows: Vice Chairman&MD ManagingDirector Jt.ManagingDirector GroupCFO CompanySecretary Mr.D.P.Agarwal Mr.VineetAgarwal Mr.Chander Agarwal Mr.A.K.Bansal Mr.A.K.Bansal CEO TCISeaways CEO TCIFreight CEO TCISCS CEO TCIXPS CEO TCIGlobal Mr.R.U. Singh Mr.I.S.Sagar Mr.JasjitSethi Mr.P.C.Sharma Mr.P.K.Jain

ThegrouphasgotacoupleofunlistedsubsidiariesincludingInfiniteLogisticsSolutionsPvt.Ltd.,TCIDistributionCentersLtd.andTCI Properties(Pune)Ltd.besidesseveralotherassociatecompanies.

November01,2013

TransportCorporationofIndiaLtd. BusinessOverview
The company has five major business divisions TCI Freight, TCI XPS, TCI Supply Chain Solutions, TCI Seaways and TCI Global Logistics.

TCI Freight: TCI Freight, the largest division of the group is the countrys leading surface transport entity. It has an extensive and strategically located branch network and trained work force. This segment of the industry is characterized as mature, highly fragmented with low barriers of entry and thereby, high competition and low margin. This division is fully equipped to provide total transport solutions for cargo of any dimension or product segment. It transports cargo on FTL (Full Truck Load)/ LTL(Less than truck load)/ Small Packages and consignments/Over Dimensional Cargoes. It handles a fleet of 2,400 trucks and trailers (both owned and leased) providing freight movement services. Apart from road, the division also provides rail transportation using bulk rakes, containers etc. TCI Freight through its multimodal solutions provides services linking north to south and east to west. The company has clients from across the industries that include FMCG, electrical, engineering, pharmaceutical, chemicals, etc. The segment of the industry has been growing at 57% while the companys business has been degrowing moderately for the last two fiscals. For FY13, the division registered degrowth of 1.0% yoy contributing Rs.7774.8 mn to the topline consisting ~40% of the overall revenues with an EBITDA of Rs.232.7 mn. In recent years, the growth has been hampered on account of severe slowdown in the economy and constant rise in fuel cost.

TCI XPS: This segment across the industry is one of the fast growing and has highentry barriers with costefficiency is the key factor. This division provides express doortodoor service for timesensitive and high value documents and parcels across 3,000 pick up and over 13,000 delivery locations in India and other 207 countries. The company operates through dedicated XPS trucks and vendors. In order to gain customer traction, the company provides several valueadded services such as diplomat delivery (i.e. nonservice location), holiday service, freight on delivery and moneyback guarantee scheme. (contd. on next page)
November01,2013

TransportCorporationofIndiaLtd. BusinessOverview
This segment of the industry has been growing at 812% and the company is managing to match the pace with the industry. During FY13, this business division registered a growth of 12.2% yoy to Rs.5,556.7 mn to the topline consisting 28% of the overall sales with an EBITDA of Rs.454.9 mn. Over the past few years, the demand for express cargo services has outgrown the traditional setups, particularly in the corporate sector.

TCI Supply Chain Solutions: This segment provides inbound/outbound logistics and supply chain solutions right from the conceptualization to implementation. The services include supplychain design and reengineering, lead logistics, specialized logistics, warehouse management, yard management, information management and record management. It operates with a customized fleet of 1,046 trucks including 38 refrigerated trucks. Currently, auto sector contributes to 70% of the revenues from the segment though its services are being offered to retail, telecom, healthcare and chemical industries. The segment has esteemed and vast clientele that includes Maruti, General Motors, Tata Motors, Hero, Bajaj, Hindustan Unilever, Samsung, Scoda and others. This segment of the industry is poised to grow at 2025% over the next few years and the company cloaked in turnover of Rs.5,189.2 mn that consisted nearly 26% of FY13 sales, with an EBITDA of Rs.600.1 mn during FY13.

TCI Global Logistics: TCI Global Logistics provides a single window solutions across all major South East Asian countries through a network of international offices in the region besides having strategic presence in high growth and emerging markets in Asia, Brazil (Latin America) and Africa. The customized endtoend services ranging from customs clearance, international inbound and outbound freight handling both, air and sea, primary and secondary warehousing and redistribution, third party logistics, multimodal (air, road and sea) services, over dimensional cargo movements, mining logistics and project cargo. These services have been segregated as ocean freight, air freight, express and courier, warehousing, transportation and supply chain management. This segment of the industry can be characterized as mature with medium entry barriers that usually grows at 1012% per annum. The current contribution from this segment is miniscule and negligible.
November01,2013

TransportCorporationofIndiaLtd. BusinessOverview
TCI Seaways: This division started as an independent sea cargo division in February 1995. The division is well equipped with 1200 containers and four vessels namely TCI Arjun, TCI XPS, TCI Prabhu and TCI Surya (25004500 DWT and total capacity of 15634 DWT cumulative capacities). This division provides services such as coastal services, ship chartering, international shipping and project cargo. The domestic services include costal shipping, agency service while the international services include break bulk, project cargo and containerized businesses. TCI Seaways caters to the coastal cargo requirements for transporting container and bulk cargo from ports on the east coast to Port Blair in the Andaman and Nicobar Islands and further distribution within the islands. The cargo largely consists of a variety of products including cattle, perishables and general goods to the islands. It usually ferries back timber, wood products, and betel nuts to the mainland from the islands. Moreover, a substantial cargo relates to the defense equipment and movement of vehicles. The segment is considering diversification beyond the Port Blair sector and augmenting its existing fleet by adding another ship. This segment of the industry is experiencing a growth phase in the country and has been growing at 1015%. During FY13, the segment earned revenue of Rs.939.0 mn and an EBITDA of Rs.132.6 mn. This division contributed to nearly 5% of the FY13 revenues of the company.

AssociateCompany

TherealestatearmofTCIGrouphasbeencreatedtolookintothedevelopmentofcommercialpropertiesofTCI.Theseproperties willbe developedintoofficecomplexes,residentialbuildings,etc.dependingonthebestuseoftheproperty.Itisalsoundertakingdevelopment oflargemodernwarehouses,logisticsparksetc.

November01,2013

TransportCorporationofIndiaLtd. BusinessOverview JointVentures

The company also has a rail logistics jointventure called Infinite Logistics Solutions in consortium with Container Corporation of India (CCI) in which the company owns 51% stake while the remaining 49% is owned by CCI. The JV which integrates rail and road cargo movement establishes synergy between two rail and road giants and provides endtoend multimodal solutions with reduced turnaround time significantly for movement of goods. The total paidup equity capital is Rs.30 mn; during FY13, the JV registered a revenue of Rs.176.6 mn with marginal profit.

The company also has an autologistics JV in collaboration with Japanese company, Mitsui & Co. Ltd., Transystem International Ltd. (founded in 1999) in which the company holds 49% stake. The JV is the lead logistics partner for Toyota Kirloskar Motors Ltd. in India and provides complete logistics solutions from inbound to outbound transportation across the world. For FY13, the JV company paid dividend on the paidup equity capital of Rs.80 mn.

November01,2013

TransportCorporationofIndiaLtd. BusinessOverview
FY13Sales
2%5% 31% 36% TCIFreight TCIXPS TCISCS 26% TCIGlobal TCISeaways TCIEnergy 46% 31% 3% 6% 11% 3%

FY13Profits
TCIFreight TCIXPS TCISCS TCIGlobal TCISeaways TCIEnergy

30,000 25,000 7.5% 20,000 15,000 10,000 5,000 2.8% 13,513 FY09 2.9% 2.7% 18,513 3.0% 3.3% 3.4% 7.5% 7.5% 8.0% 8.2% 8.0% 8.4%

9.0% 8.0% 7.0% 6.0% 5.0% 3.2% 4.0% 3.0% 2.0% 1.0% 0.0% 19,537 21,305 23,015 25,223

FY10

15,215

FY11 Sales(Rs.mn)

FY12 EBITDAMargin

FY13 Netmargin

FY14E

FY15E

November01,2013

TransportCorporationofIndiaLtd. IndustryOverview
India is emerging as one of the worlds leading consumer market with the expanding middle class and improving affordability. Reportedly, the total consumption expenditure is expected to more than triple from $991 bn in 2010 to $3,600 bn in 2020. Food, housing and consumer durables coupled with transport and communications are expected to drive the growth in coming years while accounting for nearly twothird of the aforesaid consumption expenditure. In order to cater to such growing market, the logistics sector is expected to play a key role. The Indian logistics sector which is said to have a market size of nearly $230 bn and has been growing at 810% p.a. over the past few years and according to various agencies, it is expected to grow at ~15%, once the capex cycle revives. However, the cost of logistics in the country currently stands at roughly 13% of GDP as compared to the usual 89% that prevails in the developed economies. Since, the cost of logistics is a key factor in the overall cost of a product and service, manufacturers and service providers continuously hunts for efficient and effective logistics solutions which could make them more competitive in the global markets. The anticipated growth in manufacturing industries is likely to further intensify the competition in this space which will require companies to augment their supply chain mechanisms. Manufacturing companies may place greater focus on their production activities, with the result that many of them may begin outsourcing the transportation and logistics processes to third parties. The Indian logistics sector is still in the nascent stage and dominated by unorganized sector. The factors which have been assisting the growth of logistics industry in the country over the past few years includes rapid growth in industries such as automobile, pharmaceuticals, consumer goods and online retailing alongwith relaxation in FDI investments and evolving tax system. In addition, increasing competition and cost, rising importance of outsourcing, entry of foreign players have contributed substantially to the growth of this sector. All the major industries including aviation, mining, retail, automobile, pharmaceuticals and others have been investing substantially in improvising their logistics. All these factors have resulted in a significant rise in the volume of freight traffic, which has resulted in opportunities in all features of logistics including transportation, warehousing, freight forwarding, express cargo delivery, container services, shipping services and others. Going forward, it is needless to mention that the logistics is likely to be one of the key determinants of the pace of future growth. Thus, logistics have become an area of focus and priority in the last few years. India continued to hold the second ranking in the Agility1 Emerging Markets Logistics Index 2013 (which conveys the opportunities and potential growth) on account of huge potential and increased market compatibility and an increase in foreign direct investment and improvements in security levels .
1

Agility is one of the leading providers of integrated logistics. It is a publicly traded company with $4.8 bn revenue and more than 22,000 employees in 500 offices across 100 countries.

November01,2013

TransportCorporationofIndiaLtd. IndustryOverview
The primary characters of this industry segment are road transport (trucks), railways, third party logistics (3PL), warehousing coupled with several new emerging categories such as express cargos and logistics parks. Road Transport: According to CII, India has worlds secondlargest network of roads (3.8 mn kms); However, the national highways form only 2% of the total roads and about 80% of the roads in India are village roads. This segment holds the majority chunk of the Indian logistics space and contributes nearly 5% of the GDP, of which, more than fourfifth is driven by unorganized segment. The logistics space in India is highly fragmented and there are diseconomies of scale due to the small size of operators. The unorganized segment dominates the market and in absence of any regulated framework they very often manage to safeguard their margins even at the costs of unlawful and illegal measures. Thus, the organized players end up competing with these unorganized operators putting an immense downward pressure on pricing. Moreover, the Indian trucking segment has one of the lowest freight rates indicating very low margins leaving transporters thereby discouraging further investments in assets and technology. Since the sector is yet to receive an industry status, it makes it difficult for transporters to raise capital and debt through organized banking and financial channels. The forces that drive this space are supply and demand of trucks, fuel prices, seasonality, industry shipment, etc. The lack of comprehensive information on the freight rates and the density of freight lorries on certain routes which make it very difficult to predict the trend in freight rates. In absence of industry statistics and in order to meet this requirement, TCIL took an initiative with the launch of Road Freight Index (RFI). The RFI is an index of weighted average freight rates compiled across various routes, similar to a stock market index.

Road FreightIndex
200 180 160 140 120 100 80

165 123 127 140

167

171

172

174

175

176

107

110

114

FY01
Source:CompanyWebsite

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

November01,2013

10

TransportCorporationofIndiaLtd. IndustryOverview
Rail Transportation: Railways is the second important link of industrial transportation in the Indian logistics space. It is one of the world's largest railway networks comprising 115,000 kms of track over a route of 65,000 kms. It moves nearly onethird of the total national freight in terms of volumes, however, the trend is different in US and China where railways carry nearly half of the total freight volumes. The lag is primarily due to limited supporting railway infrastructure and absence of lastmile reach. This raises the requirement for extension of railnetwork and multimodal transportation. Multimodal transportation inline with the developed countries should be encouraged where long distance transportation services may be provided by railways and the lastmileconnectivity may be provided by roads. However, victimized to the bureaucratic situation that prevails in the country, the concept has not been able to attain desired results. Going forward, we believe that the enhanced industrial activities coupled with emergence of new players and growing existing players in the organized segment will eventually bid for the requirement of multimodal transportation. ThirdParty Logistics (3PL): It is an industrial activity of outsourcing logistics activities such as transportation, distribution and sometimes entire supply chain solutions to an outsourced or third party logistics service provider. Third party logistics providers typically specialize in integrated operations, warehousing and transportation services that can be scaled and customized to customers' requirements based on market conditions and the demands and delivery service requirements for their products and materials. This concept has been growing substantially all over the world. Factors such as global sourcing, widening customer markets and growing competition among manufacturers have made the material movement complex giving enhanced attention to third party logistics players. According to the company, Indias 3PL market is estimated to reach revenues of Rs.190195 bn by FY15 and is expected to play a much important role in the years to come. Warehousing: The anticipated growth in transportation and logistics market calls for aid from the other arms of the logistics space such as technological implementations, network optimization and improved warehousing. In the recent times, the warehousing has continuously been evolving from traditional godowns or stores to modern facilities with modern, efficient and fully automated set ups and multirack and palletization infrastructure, etc. However, there are several key challenges such as high price sensitivity of customers and limited infrastructure connectivity constraints a service providers capability to offer worldclass services apart from other problems like capital intensive and land requirements. Currently, nearly 90% of the Indian warehousing industry is dominated by the unorganized sector. Nevertheless, according to several industry reports this segment of the logistics industry is growing at above 30%. Express Freight: The requirement of cost and time efficiency combined with expected growth in document shipments and high value products have resulted into a high speed express segment using road and air network. This segment has been growing above 20%.
November01,2013

11

TransportCorporationofIndiaLtd. IndustryEstimatesthatindicategrowthgoingforward
According to various industry sources, the following facts showcases the anticipated upsurge in the trade and commerce in the country: According to Automotive Component Manufactures Association (ACMA), the Indian auto component industrys turnover is reported to be $41 bn in FY13 and is projected to touch $115 bn by FY21. The industry is expected to invest around Rs.70 bn ($1.2 bn) over the next three years on new projects, as indicated by the rating agency ICRA. According to India Brand Equity Foundation (IBEF), the production of cement increased at 10% CAGR over FY0711. Going forward, the market size of the industry is expected to grow from 223 MTPA during FY12 to 550 MTPA by FY20. According to a report titled 'India Food Service Report 2013' by National Restaurant Association of India (NRAI), the Indian food industry currently stands at Rs.2,476,800 mn and is expected to touch Rs.4,080,400 mn by 2018, registering a growth of 11%. The Indian textile and apparel industry is expected to triple from $78 bn currently to $221 bn by 2020, according to Technopak's Textile and Apparel Compendium 2012. Accounting for around 1415% of the gross domestic product, the Indian retail industry is estimated to be worth around $500 bn currently and is expected to increase to $750850 bn by FY15, according to a report by Deloitte. The share of organized retail is expected to increase from 57% currently to 24% by 2020. Indias industrial energy consumption is expected to double by 2020. In this scenario, the country will need to mine 2 bn tonnes of coal by 2030 and transport 75% of mined coal. Further, around 30% of total transported coal will have to be imported through ports. Finished consumer goods, both imported and those produced in India, will have to be transported to the countrys middleclass consumers, which is expected to quadruple from 160 mn by 2030. The exportimport cargo at Indian ports is projected to increase from 890 MMT1 currently to 2,800 MMT by 2020. Agricultural output is expected to increase to 295 MMT by 2020. India Ratings & Research (IndRa) anticipates that growth in Indian steel sector will gain momentum FY14 onwards on the back of growth in other economic segments; by 2030, Indias crude steel production is expected to increase by a factor of 4. The Government has planned infrastructure investment worth Rs.65,79,463 crores for twelfth 5 year plan (20122017);
1

MMT millionmetrictonnes

Source:VariousIndustryReports

November01,2013

12

TransportCorporationofIndiaLtd. GrowthDrivers
Emerging trends in the Indian logistics space and shift to organized logistics market: As mentioned earlier, the Indian logistics space is witnessing a surge in the emergence of new concepts and improvisation, innovation and inspiration in some of the fastest emerging segments including warehousing storage, third party logistics, express cargo and logistics parks. The demand for industrial warehousing space is estimated to be growing at a CAGR of 6.8% over the past few years taking to nearly 476 mn sq. ft. in 2013. The share of modern warehousing is anticipated to grow to 30% (178 mn sq. ft.) by 2015. In value terms, it is expected to reach beyond Rs.1,200 bn by FY15. This sharp growth is expected to be driven by rising domestic and exportimport freight volumes, strengthened investment in infrastructure, organized retail, focus towards manufacturing and the implementation of goods and services tax. Moreover, 3PL is gaining importance in the Indian logistics space and as mentioned earlier this business dynamic is expected to reach Rs.190195 bn by FY15. Furthermore, over hundred logistics parks spread over approximately 1.4 lakh sq. mt at an estimated cost over Rs.55,000 mn are expected to be operational in close proximity to state capitals and some Tier II and Tier III cities promising relatively lower costs and better connectivity to multiple markets. Growing investments in infrastructure and rising attention towards logistics: The logistics sector is gaining momentum as the country is gradually moving on to become a manufacturing hub. On the other front, the latest development in this space, ecommerce has gained importance. The consumption patterns have changed thereby giving push to etailing, which will eventually be a crucial milestone in the sector. The emergence of dedicated freight corridors across the country will further strengthen the logistics; in such a move, seven new cities have been finalized under the DelhiMumbai Industrial Corridor project and plans for two new smart industrial cities are on the cards. This five lakh crore plus project will elevate the freight distribution to new levels and there will be industrial parks and logistics bases with welldeveloped infrastructures setting up. Moreover, FDI in retail will impact the economy as well as logistic sector as it will increase productivity and ensure an efficient distribution network. Furthermore, with Goods and Services Tax (GST) the entire logistics industry can be assured of a unified tax structure and help in bringing down overall costs considerably. To conclude, factors including the planned expenditure towards infrastructure, shift from unorganized to organized, FDI in retail and ecommerce, increasing industrial activities, growing exports and imports and rising demand for costefficiencies and effective operations by the corporates promises for a consistent evolution of the Indian logistics space.

November01,2013

13

TransportCorporationofIndiaLtd. InvestmentThesis
The past couple of years have been lacklustre for most of the industries on account of general economic slowdown driven by liquidity crunch and subdued product demand that resulted into costoverruns, lower profitability and decisions relating postponement of capital expenditure. Similarly, Indian logistics space was also impacted and witnessed a tough and stagnant phase. Nevertheless, the company managed to continue with the gradual and steady growth. Over the past five years, TCIL s business has grown at a CAGR of 11.3% and the operating profits have grown at a 14.2%. During this period, the company incurred a capex of nearly Rs.5,000 mn of which majority was spent over enhancing the fleet of trucks and cars coupled with investments into hub centers and small warehouses. Approximately, onefourth of this total expenditure flowed towards windpower, ships and containers and others. These investments helped the company to reach a topline of Rs.21,305 mn in FY13 with nearly 8.2% EBITDA margin and 3.3% bottomline profitability. Going forward, the company has proposed a capital expenditure budget of Rs.2,300 mn (including the unspent funds of Rs.900 mn of previous fiscal.) The logistics space in India is in its initial phase as almost 90% of this space is commanded by unorganized sector and is yet to achieve the status of an industry. The shift towards organized segment and need for efficiency by the corporates will play a major role in the growth phase. In addition, the economic reforms, implementation of goods and services tax, investments in infrastructure, widening geographical horizons for the distribution of products are likely to keep the logistics sector in higher trajectory. With this vision, the company is focusing on diversification into emerging businesses and growing the traditional segments. The current investments by the company will help in gaining the scalability and maintain its leading position amongst its peers, going forward. The company has also improved its operating profitability through several costcutting measures. The debtequity ratio stands at comfortable 0.71x; we expect the company to register a topline of Rs.25,406 mn in FY15 with 3.5% of net margin that translates into an Earnings Per Share of Rs.12.1 as against Rs.9.6 in FY13. On the valuations front, the company is trading at substantial discount to its peers. At current price of Rs.50, the company trades at 5.2x considering FY13 EPS and 4.1x FY15 EPS of Rs.12.1. The company is trading at 0.6x its FY15E book value of Rs.80. Looking at our estimates for FY15, the company is trading at attractive valuations of 0.1x Pricetosales and 2.8x EV/EBITDA. We believe, these valuations provide a decent margin of safety and the current investments promises strong growth going forward, thereby, presenting a lucrative investment opportunity with a longterm investment horizon. In addition, the company has never missed out on dividend payout in last 13 years. For past two years, the company has increased its dividend payout to 50%.

November01,2013

14

TransportCorporationofIndiaLtd. PeerComparison
GatewayDistriparksLtd. Price Earning(P/E) Price toBookValue ( P/BV) EV/EBIDTA MarketCap/Sales ContainerCorporationOfIndiaLtd Price Earning(P/E) Price toBookValue ( P/BV) EV/EBIDTA MarketCap/Sales AllcargoLogisticsLtd. Price Earning(P/E) Price toBookValue ( P/BV) EV/EBIDTA MarketCap/Sales TransportCorporationofIndiaLtd. Price Earning(P/E) Price toBookValue ( P/BV) EV/EBIDTA MarketCap/Sales Blue DartExpressLtd. Price Earning(P/E) Price toBookValue ( P/BV) EV/EBIDTA MarketCap/Sales GatiLtd. Price Earning(P/E) Price toBookValue ( P/BV) EV/EBIDTA MarketCap/Sales SOURCE:Capitaline TTM 9.0 1.4 4.9 1.1 TTM 15.0 3.4 8.0 3.1 TTM 7.5 0.7 4.2 0.3 TTM 7.1 1.0 2.8 0.2 TTM 39.9 9.7 23.9 3.4 TTM NA NA NA NA FY13 11.9 1.7 5.8 1.4 FY13 15.0 1.4 7.6 3.0 FY13 8.7 0.9 4.9 0.4 FY13 6.0 1.0 2.3 0.2 FY13 42.3 8.5 17.3 2.6 FY13 22.9 0.5 6.0 0.2 FY12 13.7 2.2 6.2 2.0 FY12 14.8 2.2 7.2 3.0 FY12 7.8 1.2 4.2 0.4 FY12 7.5 1.2 4.6 0.2 FY12 NA NA NA NA FY12 8.8 0.9 4.1 0.3 FY11 15.2 1.9 7.5 2.2 FY11 18.7 3.2 11.1 4.0 FY11 NA NA NA NA FY11 13.1 2.3 6.9 0.4 FY11 30.7 5.7 18.6 2.5 FY11 39.6 1.9 9.4 0.4 FY10 18.6 2.0 10.7 2.6 FY10 22.6 3.9 13.1 4.5 FY10 12.1 1.6 7.2 0.7 FY10 18.2 2.3 8.4 0.5 FY10 29.3 5.1 17.0 2.4 FY10 63.9 2.2 11.1 0.6 FY09 7.9 0.9 4.6 1.3 FY09 12.4 2.5 6.7 2.7 FY09 19.2 2.5 10.5 1.2 FY09 7.6 0.9 4.3 0.2 FY09 27.4 3.7 14.6 1.8 FY09 NA 1.6 18.9 0.5 FY08 17.1 1.8 9.0 4.2 FY08 15.9 1.8 9.4 3.3 FY08 13.4 0.5 7.4 0.6 FY08 19.4 2.4 9.1 0.5 FY08 13.0 2.6 7.0 1.0 FY08 33.0 2.1 13.4 0.8 FY07 20.8 2.0 12.5 9.5 FY07 18.2 2.4 11.6 4.1 FY07 24.5 0.8 12.8 1.1 FY07 NA NA NA NA FY07 25.0 5.5 13.0 2.2 FY07 34.4 4.2 16.9 1.2 CMP MktCap EV Sales FV CMP MktCap EV Sales FV CMP MktCap EV Sales FV CMP MktCap EV Sales FV CMP MktCap EV Sales* FV CMP MktCap EV Sales FV 116 12,598 14,191 9,541 10 753 146,835 117,760 44,450 10 93 11,692 17,623 39,268 2 50 3,669 6,302 21,305 2 2,795 66,242 63,825 21,717 10 29 2,481 5,775 12,730 2

TheabovecompaniesmaynotbedirectlycomparableintermsoftheirbusinessprofilesbutsincetheybelongstotheIndianlogisticsspace,wehave consideredthemforthepurposeofabroadersenseofrelativevaluations

November01,2013

15

TransportCorporationofIndiaLtd.
PROFIT&LOSSSTATEMENT(Consol.)
Y/EMar. NetSales Otheroperatingexpense Staffcost Othercosts TotalExpenditure EBITDA Depreciation Interest OtherIncome Exceptional PBT Tax RPAT FY12 19,537.5 15,685.8 1,015.3 1,271.9 17,973.1 1,564.4 415.7 350.0 56.7 855.4 262.0 595.1 FY13 21,305.3 17,184.3 1,120.9 1,262.7 19,567.9 1,737.4 464.0 336.3 73.4 1,010.5 315.2 695.1 FY14E 23,041.7 18,617.7 1,244.2 1,313.4 21,175.3 1,866.4 464.7 324.8 84.4 1,165.0 384.4 780.5 (Rs.mn) FY15E 25,406.5 20,401.0 1,397.3 1,397.3 23,195.7 2,210.3 564.2 429.6 92.9 1,317.8 434.9 882.9

BALANCESHEETSTATEMENT(Consol.)
Ason31st Mar. ShareCapital Reserves&Surplus NetWorth TotalLoanfunds DeferredTax TradePayables OtherLong TermLiabilities OtherCurrentLiabilities ShortTermLiabilities FixedAssets NoncurrentInvestments TradeReceivables Cash&BankBal. LTLoans&Advances Inventory STLoans&Advances Others TotalAssets FY12 145.4 3,637.2 3,782.6 2,992.6 317.3 873.5 0.2 514.4 227.5 4,237.1 16.6 3,364.5 307.3 108.6 19.6 664.9 17.9 8,736.5 FY13 145.7 4,224.2 4,346.9 3,092.9 314.8 877.6 7.0 561.3 415.7 4,224.7 79.7 3,951.1 460.0 237.0 21.5 662.3 14.2 9,650.4 FY14E 145.7 4,908.8 5,045.5 4,296.3 314.8 879.2 7.0 620.6 517.2 5,372.9 79.7 4,352.3 892.3 253.2 21.5 714.3 14.2 11,700.6

(Rs.mn) FY15E 145.7 5,691.0 5,836.6 4,377.5 314.8 906.7 7.0 680.0 566.7 5,952.0 79.7 4,869.5 696.6 279.5 21.5 787.6 14.2 12,700.5

Source:Company,SushilFinanceResearchEstimates

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TransportCorporationofIndiaLtd.
CASHFLOWSTATEMENT(Consol.)
Y/E Mar. Profit Depreciation&Amortization Chg.inWorkingCapital CashFlowfromOperating FY12 595.1 415.7 (24.2) 986.6 FY13 695.1 464.0 (473.2) 685.9 FY14 780.5 464.7 (307.4) 937.8 (Rs.mn) FY15 882.9 564.2 (479.9) 967.2

FINANCIALRATIOSTATEMENT(Consol.)
Y/EMar. Growth(%) NetSales EBITDA ReportedNetProfit Profitability(%) EBIDTAMargin(%) NetProfitMargin(%) ROCE(%) ROE(%) PerShareData(Rs.) EPS(Rs.) CEPS(Rs.) BVPS(Rs) Valuation PER(x) P/BV(x) EV/EBITDA(x) P/Sales(x) Turnover DebtorDays CreditorDays InventoryDays GearingRatio D/E FY11 5.5 12.9 18.7 8.0 3.0 17.0 15.7 8.2 13.9 52.1 6.1 1.0 4.0 0.2 62 20 0.8 FY12 9.0 11.1 16.8 8.2 3.3 17.1 15.9 9.6 15.9 60.0 5.2 0.8 3.6 0.2 67 18 0.7 FY13E 8.2 7.4 12.3 8.1 3.4 15.0 15.4 10.7 17.1 69.4 4.7 0.7 3.4 0.2 68 17 0.9 FY14E 10.3 18.4 13.1 8.7 3.5 16.1 15.1 12.1 19.9 80.2 4.1 0.6 2.8 0.1 69 16 0.8

(Incr)/DecrinLTInvestments (Incr)/Decr InFixedAssets CashFlowfromInvesting

(1.6) (1,127.4) (1,128.8)

(64.7)

(451.6) (1,612.9) (1,143.3) (516.3) (1,612.9) (1,143.3)

(Decr)/Incr inDebt (Decr)/Incr inShareCapital+ Dividend&RelatedTaxes CashFlowfromFinancing

334.5 0.3 (80.6) 253.2

100.4 0.2 (91.4) 10.3

1,203.4 (96.0) 1,107.4

81.2 (100.8) (19.6)

OpeningCash Cashflowduringtheyear CashattheEndoftheYear

418.3 111.0 307.3

307.3 179.9 460.0

460.0 432.3 892.3

892.3 (195.7) 696.6

Source:Company,SushilFinanceResearchEstimates

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TransportCorporationofIndiaLtd. Outlook&Valuation
Over the past five years, TCILs topline has been growing at a CAGR of ~11.4% and the operating profits have grown at a CAGR of ~14.2% during the same period. Currently, inline with the industry, the company is going through challenging times on account of general economic slowdown that has impacted the topline growth and profitability. However, the company has significant expansion plans which will benefit the company going forward. We expect several factors such as shift towards organized segment, investments in infrastructure, anticipated economic reforms, implementation of goods and services tax, widening geographical horizons for the distribution of products alongwith rising demand for costefficiencies and effective operations by the corporates are likely to play a vital role in the development of Indian logistics space. Moreover, considering the companys capex plans, comfortable debt levels, diversified business portfolio and focus on highmargin business of supply chain solutions and current valuations indicates a good investment opportunity. At current price of `50, the company is trading at 4.1x its FY15 EPS of ` 12.1. By allocating a target multiple of 6.0x to its FY15 EPS, we derive a target price of `73 for the stock.

Positives
Leadingpositioninroadtransport Strongclientelerelationship Risingfocusonhighmarginbusinesses Diversifiedbusinesses Substantialexpansionplans Comfortablevaluations Stableprofitsandtoplinegrowth Consistentdividend

Negatives
Marketlargelydominatedbyunorganizedplayers Intensifyingcompetition Entryofnewplayersinvarioussegments Lowerbargainingpowerinfreightbusiness

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TransportCorporationofIndiaLtd.

ANALYST SaurabhJain|+912240934004 saurabh.jain@sushilfinance.com

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