Accumulate Transport Corporation of India: Religare

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Accumulate Transport Corporation of India: Religare

Religare has maintained its accumulate rating on Transport Corporation of India with a target price of Rs 125. Net sales rose by 12.7% YoY to Rs 3.3 billion. However, sales are not strictly comparable YoY due to the hive off of fuel pump stations.

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Religare has maintained its accumulate rating on Transport Corporation of India with a target price of Rs 125 in its June 5, 2008 research report. "Net sales rose by 12.7% YoY to Rs 3.3 billion. However, sales are not strictly comparable YoY due to the hive off of fuel pump stations. If we exclude the revenues generated from the fuel pumps, then sales rose by 17.8% YoY. Adjusted PAT grew by 66.1% YoY to Rs 157 million."

"At the CMP of Rs 83, the stock trades at 14.3x its 1 year forward earnings. After adjusting for the upside from the real estate properties, the core business trades at 11.6x its 1-year forward earnings. Though we have downgraded our earnings estimates marginally, we still expect a very strong earnings growth of 32% and 55% in FY09 and FY10 respectively. We are confident that the company will be able to add new clients in the future in its supply chain division on the back of a proven track record with Toyota, which might even give us a positive surprise on the EBITDA margin front. Consequently, we maintain our Accumulate rating and the target price of Rs 125 on the stock. We value the base business of TCI at Rs 110 which implies a13x multiple to its 2-year forward earnings and Rs 15 per share from the real estate properties," says Religare's research report.

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