Buy Navkar Corporation; target of Rs 230: Axis Direct

Axis Direct's research report on Navkar Corporation

Panvel volumes were flat QoQ (down 2% YoY) given intermittent slowdown due to Direct-To-Port Delivery (DPD) volumes. Management highlighted CFS share of overall DPD volumes has increased to 61% vs. 39% in February, which will reduce overall volume-led pressure going ahead. EBITDA margin improved ~6% QoQ to Rs 4,535primarily on cost savings benefits on RTGC installation.

Outlook

Vapi volumes doubled QoQ to 5,718 teus (2,886 teus in Q4) though EBITDA margin declined to Rs 3,150 (vs. Rs 4,350 in Q4) on higher growth in export cargo (low margin). Construction of rail siding is complete, and management is awaiting final signal clearance from Railways – expected in Q2 now (Jun’17 guided earlier); hence, lower FY18E EBITDA by ~5%. We rate the stock as a BUY (HOLD earlier) with TP of Rs 230 (18x FY19E EPS; Rs 235 earlier) on expected benefits from volume ramp-up at Vapi, given attractive pricing (~25% lower to peers).