Buy Arshiya International; target of Rs 172: Emkay
Emkay Global Financial Services is bullish on Arshiya International (AIL) and has recommended buy rating on the stock with a target of Rs 172 in its November 20, 2012 research report.
November 23, 2012 / 11:27 IST
Emkay Global Financial Services is bullish on Arshiya International (AIL) and has recommended buy rating on the stock with a target of Rs 172 in its November 20, 2012 research report.
“AIL reported topline of Rs 3.7bn. growth of 50% YoY and 9% QoQ; 2% above estimate. Logistics business growth surprised positively while FTWZ business disappointed marginally. EBITDA stood at Rs 1.1bn, growth of 70% YoY and 16% QoQ; in-line with our estimate. EBITDA margins stood at 29%, increase of 339bps YoY and 168 QoQ. EBIT margins segment-wise had disappointment on Logistics business, falling by 328bps QoQ and 553bps YoY. AIL strategy on its Logistics segment has been to generate business by compromising on the margins, which have fallen QoQ over last 4 quarter with revenue increasing by 28% over same period. PAT stood at Rs 354mn, growth of 11% YoY and 2% QoQ. Lower PAT growth than EBITDA is due to forex loss of Rs 79mn in the quarter vis-à-vis gain of Rs 67mn QoQ and loss of Rs 42mn YoY. Forex loss mainly pertains to re-statement of FTWZ receivables at closing of Q2FY13. Tax rate at 20.4% was up from 10.8% QoQ and above our estimate of 16%. FY13 full year tax rate is expected to be ~17%.” “AIL currently operates 20 rakes in the domestic side of the rail transportation business. The company had signed a long-term agreement with Gatx, USA wherein latter will provide rakes to former on long-term lease basis. AIL plans to add 5 new rakes on through this deal by FY13. This new rakes are supplements to the Khurja rail sidings and distribution hub, thus providing an integrated logistics services to its clients. Indian Railways (IR) has increased the haulage charges for Container Rail Operators (CTOs) with effective from Dec '12 (22%) and Feb'13 (9%). IR has formed a new tonnage slot of 10-20 MT containers where the charges have increased the maximum. AIL operates its rail business in the domestic segment wherein ~80% of its cargo is more than 20 MT. In this slot, the increase has been in the usual range of 7-8% done every year. This increase will affect AIL’s rail business to a certain extent considering it will reduced competitiveness with road transportation. AIL is mitigating this threat by provide packages services of storage, value addition and last-mile distribution to the customers.” “Post commencement of operations of Khurja FTWZ in Q4FY12, AIL added a warehouse in Mumbai FTWZ taking the total to six. Company has another 4 warehouses under construction of which 2 will come up for leasing in Q4 FY13. Unlike its past warehouses which involved storage in pallets, these four new warehouses are multi-storied and multiproduct oriented viz. car, chemicals, fertilizers, etc. AIL has acquired clients in these product categories and these warehouses will cater to their specific storage requirements. AIL’s Khurja FTWZ has seen investment of Rs 6.4bn of which Rs 5.3bn are towards Phase 1 comprising of 3 warehouses. Company has invested additional Rs 1.1bn towards equitu portion of phase 2 for which financial closure is awaited. We have not factored in any further investment towards the same in FY13. Maintain Buy with TP of Rs 172,” says Emkay Global Financial Services research report. Public holding more than 90% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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