Transport Corporation of India Ltd. - Q3 FY14 Update - Book Partial Profits - CMP Rs.94 - Increased Target of Rs.105 - INVESt VISTa - Sushil Finance

TRANSPORT CORPORATION OF INDIA LTD. - Q3 FY14 RESULT UPDATE - CMP Rs.94, Maintain HOLD, Target Rs.105

Transport Corporation of India Ltd. (TCIL) released its Q3 FY14 performance on January 28, 2014. Following are the highlights from the quarterly results. The Management recommended an interim dividend of Re.0.50;

Q3 FY14 Result Highlights (Standalone)

- During Q3 FY14, the top-line grew 4.7% YoY to Rs.4,920.5 mn driven by strong growth registered in the company's XPS division. In addition, the Supply Chain Solutions and Seaways businesses also made healthy contributions to the top-line. The growth was partially offset by fall in Freight Division.

- The Freight Division registered a fall of 1.1% in revenues from Rs.1,960.7 mn in Q3 FY13 and 0.1% from Rs.1,942.0 mn in Q2 FY14 to Rs.1,940.0 mn in Q3 FY14. The profitability also dampened during the quarter; the profit margin fell 145 bps YoY to 0.4% while there was a marginal improvement sequential basis. This business segment consists nearly 37% of the total revenues of the company.

- The XPS Division which now consists of nearly 30% of the total business revenues of the company registered a healthy growth of 6.3% to Rs.1,543.2 mn in Q3 FY14 as compared to Rs.1,451.9 mn in Q3 FY13 and Rs.1,489.9 mn in Q2 FY14. However, the profitability edged down on an annual basis, but there was substantial improvement on the quarterly basis. The XPS business generated profits to the tune of Rs.121.2 mn during the quarter.

- The third division, Supply Chain Solutions, grew 10.7% from Rs.1,303.2 mn in Q3 FY13 and 12.9% from Rs.1,278.0 mn in Q2 FY14 to Rs.1,442.5 mn in Q3 FY14. Thus, this fast-growing segment consisted roughly 28% of the top-line. However, the profitability was marginally impacted on an annual basis largely due to the economic slowdown, but it showcased an improvement on sequential basis.

- The Seaways business registered a top-line growth of 28.1% to Rs.277.3 mn in Q3 FY14 while on q-o-q basis, the revenues from this segment were down 4.0%. This segment witnessed significant uptick in the profitability during the last two quarters. During the quarter, Seaways contributed 5% to the top-line while the segment contributed more than 1% to the operating profits.

- The EBITDA grew 9.4% YoY and 14.6% QoQ to Rs.376.1 mn; the EBITDA margin also showcased an improvement resulting from marginal decline in the primary operating expense, as a percentage of revenues. Employee benefit expense and other expenses broadly remained at the similar levels.

- The improvement at the operating level was further carried down to the bottom-level; the Company reported net profit of Rs.143.9 mn in Q3 FY14 as compared to Rs.113.4 mn in Q3 FY13 and Rs.130.9 mn in Q2 FY14; the net margin stood at 2.8% in Q3 FY14 as compared to 2.3% in Q3 FY13 and 2.6% in Q2 FY14.

- The Company reported EPS of Rs.1.97 in Q3 FY14 as compared to Rs.1.79 in Q2 FY14 and Rs.1.56 in Q3 FY13; for the 9M FY14, the Company reported Rs.5.69 as compared to Rs.5.23 in 9M FY13.

OUTLOOK & VALUATIONS

We had released our initiating coverage on Transport Corporation of India Ltd. on November 01, 2013 with a BUY recommendation in our Muhurat Pick Stock Review at Rs.50 for the target price of Rs.73. Since then, the stock price has increased significantly making an high of Rs.110 on January 31, 2014. Meanwhile, we changed our rating from BUY to HOLD on December 30, 2013 as the stock breached our target. With robust returns in a short time-frame we now advise our investors to book partial profits and make their investment cost-free and continue to HOLD the remaining with long term horizon. Going forward, we believe that the company will continue to lead in the surface transportation segment of the logistics space with strong asset base. We are particularly bullish on the XPS and Seaways businesses of the Company. Hence, we have enhanced our forward estimates and target multiple and accordingly get higher target price of Rs.105 for TCIL.

Source : Equity Bulls

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