Print Page | Close Window

Transport Corp - India's UPS?

Printed From: The Equity Desk
Category: Investment Ideas - Creating winning portfolios!
Forum Name: Stock Synopsis
Forum Discription: A bried discussion of companies on very specific matters. Normally this is the prelude for further research as always members would be discussing quality companies with good management only
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=1380
Printed Date: 21/Apr/2025 at 4:25pm


Topic: Transport Corp - India's UPS?
Posted By: smartcat
Subject: Transport Corp - India's UPS?
Date Posted: 20/Nov/2007 at 6:40pm
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.
 
Website: http://www.tcil.com - http://www.tcil.com
 
 


Replies:
Posted By: smartcat
Date Posted: 30/Nov/2007 at 4:19pm
ValueResearchOnline.com has started analyzing stocks too!
 
http://www.valueresearchonline.com/story/storyview.asp?str=10682 - TCI: Moving India
 
TCI has transformed its business model over the years to focus on high-margin businesses like supply chain, express cargo and shipping. Its six business segments ensure that it has a presence across the entire logistics value chain: transportation (including conventional trucking), express (cargo and courier), supply chain solutions (SCS), coastal shipping, windmills and trading (fuel stations).
 
TCI has lined up an aggressive Rs 340 crore capex to scale up its business in order to meet increased demand. It plans to increase its warehousing space, buy new trucks, invest in cold chains, and boost its ship fleet strength over the next three years.
 
At the current price, the stock is trading at 22.8x its FY08E EPS and 16.2x its FY09E EPS. We expect revenues to grow at a CAGR of 19 per cent from Rs 1,085 crore (FY07) to Rs 1,531 crore (FY09E) while net profit is expected to grow at a CAGR of 34 per cent from Rs 31 crore to Rs 55 crore during the same time frame. 

Posted By: sureshbazi
Date Posted: 02/Oct/2008 at 7:33pm

TCI has some real estate also as additional value.

 

http://propertybytes.indiaproperty.com/?p=2180 - http://propertybytes.indiaproperty.com/?p=2180

 

Logistics and GDP is related. As India has good GDP growth, logistics should do well and TCI is a pure logistics play in the sector should do well.

 

 



-------------
'It is only when you combine sound intellect with emotional discipline that you get rational behavior.' – WB.

Posted By: basant
Date Posted: 02/Oct/2008 at 7:58pm
No moat, unknown promoters, dependence on crude as an input all indicate that it is not a business which would fetch a high multiple.


-------------
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in

Posted By: Vivek Sukhani
Date Posted: 02/Oct/2008 at 8:54pm
But it was fetching a multiple of 35+ a year back only......35+ is not small, in my opinion.

-------------
Jai Guru!!!

Posted By: basant
Date Posted: 02/Oct/2008 at 9:34pm
That was crazy. These businesses should not be worth more then 8-10 times earnings.


-------------
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in

Posted By: Vivek Sukhani
Date Posted: 02/Oct/2008 at 9:38pm
But TCI has a very big fleet.......I think that needs to be discounted properly.
Its an old hand in this business. However, players in this industry are not the likes which will give you that sense of comfort to continue holding them at all points of time. I think a concor shll be a much better play.....what do you say?

-------------
Jai Guru!!!

Posted By: basant
Date Posted: 02/Oct/2008 at 10:10pm
That big fleet gets deperaciated very fast it is a highly capex model with heavy depreciation and maintenence charges.


-------------
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in

Posted By: tigershark
Date Posted: 02/Oct/2008 at 10:29pm
they require huge capex to grow wonder from where they will raise were supposed to have disposed of land but i suppose they have missed the bus.extremly low margin business high int rates could further bring margins down. just becos fedex or atnt became big names that does not mean every logistic co in emerging mkts one will becom the former.it does require extraordinary management to reach there

-------------
understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things

Posted By: Shadofax
Date Posted: 09/Jul/2010 at 3:10pm
Hello Smartcat,

I saw posts about TCI dated 2008. Mostly all of them were sceptical.

I am not able to make up my mind about this business.

RDs idea is that it is an Asset Play + Warehousing business (high margin)

I also heard about Appolo logistics being formed for the similar warehousing facility business.

Would really appreciate views from all members and from you.

Thanks


-------------
$

Posted By: smartcat
Date Posted: 09/Jul/2010 at 3:27pm
Dhruvesh, I sold TCI after I changed my investment style.  However, I feel TCI is one of the best logistics stock you can buy. They have a toehold in all aspects of logistics - road transport, sea transport, door to door courier and warehousing.

Posted By: swagal
Date Posted: 12/Feb/2011 at 7:13pm
With gdp expected to grow 8%+ anually i think this stock should do well as after all they have indepth hands on knowledge of the business.

Posted By: superselector
Date Posted: 31/Oct/2011 at 10:49am
What am I missing with this company?

Current market cap (~560 crores) is 1/3rd of its FY11 sales and the total net profit for FY11 was 51 crores. Lets say if I gobble up the company for 550 odd crores, without any increase in profits, the investment can be recouped entirely in 10 years (50 crores profit per year) and keeps giving cash flow thereafter. The basic point I am trying to understand is: Is the current market cap too low for such a business? Can another TCIL be setup with 550 crores from scratch? I understand that the low PE (~10) it is commanding right now is probably because of low margins. But, in a country like India where volume growth is not hard to come by in such a industry, may be it is not a bad bet. I have read somewhere that GST whenever it comes would be shot in the arm to these 3rd party logistics companies which would drive more volumes. Just can't seem to understand why this is lying so low in terms of market cap. The potential opportunity appears huge. Someone please point out what am I missing in evaluating this company?

Posted By: rapidriser
Date Posted: 31/Oct/2011 at 11:47am
@superselector - Ramesh Damani has been recommending this stock for at least 3-4 years for the same reasons that you have mentioned.  Somehow the market is not convinced about this story.

Some reasons are Low Dividend Payout Ratio, Low ROCE & Sleepy Management.




-------------
When all else is lost, the future still remains. - Christian Nestell Bovée

Posted By: swagal
Date Posted: 01/Nov/2011 at 1:15pm
rapidriser:
1. what dividend payout ratio will excite you.
2. what ROCE will re-rate the stock higher and to what multiple.
3. what do you expect from management in terms of actions.

Posted By: rapidriser
Date Posted: 01/Nov/2011 at 2:45pm
Originally posted by swagal

rapidriser:
1. what dividend payout ratio will excite you.
2. what ROCE will re-rate the stock higher and to what multiple.
3. what do you expect from management in terms of actions.



These are not hard and fast rules, but CONSISTENT 25% Dividend Payout ratio, 25-30% ROCE is what I expect.


-------------
When all else is lost, the future still remains. - Christian Nestell Bovée

Posted By: superselector
Date Posted: 01/Nov/2011 at 12:42pm
@Rapidriser : Thanks for the reply.

The company's quarterly results also came out yesterday. The results don't look good. Almost nil sales growth from year ago period and the net profit has fallen 5% due to increased interest and fuel costs. I will keep this counter in my watch list and reevaluate it couple of quarters down the lane.

Posted By: Rishit
Date Posted: 18/Nov/2011 at 12:41pm
Low margins show zero pricing power, no moat....add high capex and it seems like a business clearly to ignore....the positive is that it is a very large player in the logistics industry and anything that benefits the industry, should benefit TCI, in terms of volumes and margin improvement...Waiting to see results post GST (can't clearly understand the impact at the moment), would rather invest then even if it means at a slightly higher price


Print Page | Close Window