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Brokerage Recommendations

Thursday, June 22, 2017

Khambatta Securities calls a buy on Tiger Logistics Ltd.
CMP: 205         Target: 350

Results in line with our expectations
Result Update – 4Q FY17 & FY17
Tiger Logistics Ltd. (Tiger or the Company) reported healthy set of numbers for 4Q FY17. During the quarter, net sales increased by 18% to Rs 892 mn (Rs 788 mn – 4Q FY16).

In 4Q FY17, EBITDA grew by 59% to Rs 51 mn (Rs 32 mn – 4Q FY16) while the EBITDA margin stood at 5.7%.

Profit before tax (PBT) increased substantially by 63% to Rs 47.6 mn in 4Q FY17 from Rs 29.2 mn in the corresponding quarter of the previous year.

On the bottom-line, the Company reported three fold jump. PAT came at Rs 31 mn for 4Q FY17 (Rs 10 mn – 4Q FY16), while the PAT margin stood at 3.4%.

For FY17, the Company reported net sales of Rs 2,983 mn as against Rs 2,541 mn in FY16, an increase of 18% and 3.6% lower than our estimates of Rs 3,092 mn. EBITDA grew by 34% to Rs 172 mn from Rs 129 mn in FY16.

For FY17, Tiger registered PAT growth of 13% to Rs 103 mn from Rs 73 mn in FY16, in line of our expectation of Rs 104 mn. Adjusted EPS stood at Rs 9.7 as against Rs 6.9 FY16. We believe the Company will be able to achieve our EPS estimates of Rs 17.6 for FY 19E.

For the full year, Commodity was the highest contributor in the total revenue composition at 31%, followed by Automobiles at 23%, projects at 21%, and others at 25%. TEU’s (Twenty Feet Unit’s) increased to 26,949 for 4Q FY17 from 20,943 TEU’s for 3Q FY17. For FY 17 it increased to 81,967 against 73,185 in FY 16, indicating continuation in the growth momentum.

Multi modal segment continues to contribute the most at 57% of total revenue, Custom House Agent at 26% followed by Transportation at 15% for the quarter.

Focus on Domestic Markets to yield better returns
Tiger continued to perform better despite challenging times. The Company expanded its reach in East India which is a major hub for trade and management expects good growth from this sector. With the growth in economy, Government’s thrust on infrastructure and Make in India initiatives, exports would be on the higher side, auguring well for a company like Tiger logistics.

The Company’s dependence on a single client is reducing, as contribution to revenue from top 5 customers have come down from 48% in FY 14 to only 18% in FY 17, indicating that the Company is expanding its client base and de-risking the business model. The management continues to focus on domestic logistics by leveraging its existing infrastructure and network to enter the lucrative segment of Less than Container Load (LCL) segment.

Tiger Logistics have recently been honoured as the “Best Logistics Company for the Financial Year 2016-17” at National Conference on Cold Chain – Convergence and Capacity Building and Awards 2017.

Valuation and Recommendation
At the CMP, the stock trades at a P/E multiple of 15x/11x FY18E/FY19E EPS. We believe, with uptick in economy, revival in infrastructure cycle, Make in India to boost the demand for logistics of goods and services thus benefitting the Company. Due to rich business fundamentals and asset light model, we expect the high valuations to continue and recommend a BUY with a price target of Rs. 350, an upside potential of 79%.

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