Edelweiss' research report onFuture Supply Chain Solutions
We anticipate a demand boom for third party logistics (3PL) services as manufacturers sharpen focus on core competencies and outsource complex supply chain needs. Future Supply Chain Solutions (FSC) is geared to capitalise on this led by: i) customer stickiness due to focus on contract logistics business (70% of revenue); ii) fast expanding anchor client—Future Group; iii) diverse clientele in rapidly-growing consumer-facing businesses; and iv) moderate competitive intensity—given huge growth pie, we expect 3PL players to emerge as segment specialists.
OutlookHence, we estimate FSC to clock 36% CAGR in both revenue and PAT over FY18-20 (almost 2x industry) with strong RoE and RoCE of 21% and 36%, respectively, in FY20. Moreover, an asset-light model ensures strong free cash flow—surplus cash at 26% of net worth in FY20. Initiate with ‘BUY’.
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