Future Supply Chain Solutions Ltd - IPO Note - Angel Broking

Incorporated in 2006, Future Supply Chain Solutions Ltd (FSCSL) is one of the largest third-party logistics service providers in India. FSCSL offers services in three key areas i.e. (1) Contract Logistics (warehousing, distribution and value-added service), (2) Express Logistics (point-to-point, less-than truck-load, time definite transportation services), and (3) Temperature Controlled Logistics (cold-chain warehousing, transportation solutions and distribution of perishable products).

Positives: (a) Diverse customer base across sectors like retail, fashion & apparel, automotive & engineering, food & beverage, FMCG, e-commerce, healthcare, electronics & technology, home & furniture and ATMs; (b) Improvement in operational efficiencies, technological implementation and process enhancements; (c) Asset-light model leading to higher operating leverage; and (d) Experienced management with logistics and retail sector specific knowledge. Investment concerns: (a) For 1HFY2018, FSCSL reported revenue of Rs. 408cr, out of which 70% was from Future Group; (b) The company's external business reported ~2% negative CAGR over FY2015-17.

Outlook & Valuation: In terms of valuations, the pre-issue P/E works out to 39.9x its 1HFY2018 annualized earnings (at the upper end of the issue price band), which is lower compared to its peers like Mahindra Logistics. However, Mahindra Logistics has lower promoter group business (internal business), which is ~54% v/s. ~70% of FSCSL. Further, Mahindra Logistics had reported non-promoter revenue CAGR of ~46% v/s. de-growth of FSCSL over FY15-17.

Despite the above favorable factors and lower valuations compared to Mahindra Logistics, we however, believe that all the positives are fully factored in the company's current valuations, which does not provide any further upside for investors. Hence, we recommend Neutral rating on the issue.

Shares of A Infrastructure Ltd was last trading in BSE at Rs.87.55 as compared to the previous close of Rs. 92.15. The total number of shares traded during the day was 421 in over 7 trades.

The stock hit an intraday high of Rs. 90 and intraday low of 87.55. The net turnover during the day was Rs. 36870.

Source : Equity Bulls

Keywords