Transport Corporation of India (CMP: Rs. 143) is another company whose business I like, but wouldn't invest in right now because of various reasons. TCIL is the current favorite of RD too. TCIL seems to be the only company in India that offers entire range of logistics solutions -
- Door to door courier and package services
- Land, sea, rail and air transport
- Warehousing and cold chain services
- Offers supply chain mgmt solutions to automobile, FMCG, retail cos
PROS:
- Complete logistics company
- Increasing sales every year since 2000. Reported net sales of Rs. 1,100 crores in FY07.
- Moves 1.5% of India's GDP by goods value. Owns or operates 7000 trucks.
- Will piggyback on growth in retail and agriculture sector
- Massive expansion plans. Eg: It will increase warehousing capacity from 1m sq ft to 7.5m sq ft within the next few years.
- Shipping services will provide higher 20% plus margins
CONS -
- Terrible margins. NPM in FY07 was 2.7%
- Over the next few years, it might grow its EPS at only 20 - 25%. It is currently trading at a P/E of 35 plus.
- Highly competitive industry
- Bigger retail companies like Future Group and RIL are setting up their own logistics arms, rather than depend on third-party providers like TCIL.
- Risk of government regulation in courier (door-to-door) business.
Though it might not make sense to invest in this company right now, one needs to keep an eye on it. TCIL could become big.
Edited by smartcat - 20/Nov/2007 at 6:53pm
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