Choice Broking has come out with its report on Mahindra Logistics. The research firm has recommended to "Subscribe " the IPO in its research report as on October 30, 2017.
India’s logistics industry size is estimated to be at around Rs. 6.4tn in FY17. With the revival in the economics growth coupled with the implementation of GST and the improvement in the infrastructure facilities, it is expected to grow at 13% to Rs. 9.2tn by FY20. • MLL is one of the India’s largest 3PL solutions providers in the industry. It has an “asset-light” business model pursuant to which assets necessary for its operations such as vehicles and warehouses are owned or provided by a large network of business partners. This business model allows for scalability of services as well as the flexibility to develop and offer customized logistics solutions across a diverse set of industries. It operates in two distinct business segments, Supply chain management (SCM) and People transport solutions (PTS). As on FY17, the SCM and PTS business segments contributed 89% and 11% to the consolidated revenue. • It has a large network of over 1,000 business partners operating in the SCM business over its pan-India network comprising of 24 city offices and over 350 clients. As at 31st Aug. 2017, the company managed over 10mn square feet of warehousing space. Additionally, it operated in-factory stores and line-feed at over 35 manufacturing locations. Key clients for the SCM business include Volkswagen, Vodafone, Thermax, JSW Steel, Ashok Leyland, Siemens, Bosch, BMW India, 3M India and Mercedes-Benz India.
There is no listed companies in India having a business model and asset structure similar to MLL. However, other major logistics company can be considered as the proxy peer. At the higher price band of Rs. 429 per share, MLL’s share is valued at a P/E multiple of 66.9x (to its restated FY17 EPS of Rs. 6.4), which is at a premium to the peer average of 46.2x. Thus considering the above observations, we assign a “SUBSCRIBE” rating for the issue.
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