Buy Arshiya International; target of Rs 172: Emkay

Emkay Global Financial Services is bullish on Arshiya International and has recommended buy rating on the stock with a target of Rs 172 in its August 21, 2012 research report.

“AIL’s standalone topline, comprising of domestic logistics business and Mumbai FTWZ, grew by 42% YoY but higher interest cost led to fall in profits by 22% YoY. On consolidated basis the topline of Rs 3.4bn was higher than expected by 10% mainly due to strong growth in logistics business (29% YoY). EBITDA at Rs 815mn grew by 73.6% YoY and was 6% above estimate. Logistics business showed substantial growth of 29% QoQ with drop in EBIT margins to 18% from 20% YoY. Company has changed its growth strategy in this business where in the focus in more on volumes rather than high margin business.”

“Khurja FTWZ contributes Rs 167mn in Q1FY13 with exit monthly run-rate of Rs 100mn. The asset runs at healthy VOS-to-rental ratio of 1.3x considering that most of the business is moved from Mumbai FTWZ. The asset had EBIT loss of Rs 90mn in the quarter, but exited with positive EBIT and PAT in June month. Mumbai FTWZ revenue remained flat QoQ despite of addition of 5th warehouse as the VOS-to-rental ratio dropped from 1.4 to 1.16 QoQ. On operations front, CISCO has been the biggest addition on customer side with GE is also coming on board making Mumbai FTWZ is import hub for the region. AIL’s FY13 expansion plans will further scale up the operations to a large extent across its business verticals. Mumbai FTWZ is expected to exit FY13 with 8 w/hs, while Khurja FTWZ and DP will have phase 1 ready. On the lease model, company will add another 5 rakes to its current fleet of 20 rakes in the rail business.”

“Company’s current total debt is at ~Rs23.5bn which is expected to increase to Rs 27bn with this expansion plan including full expansion of phase 2 of Mumbai FTWZ comprising of another 13 w/hs to the current 5 w/hs. Management expects interest expense of Rs 2.2bn although we have estimated on a much high side. Maintain Buy rating with TP of Rs 172. At TP, the stock would trade at EV/EBITDA of 7.0x/5.8x & P/BV of 1.0x/0.9x on FY13E/14E,” says Emkay Global Financial Services research report.

Institutional holding more than 40% in Indian cos  

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