According to Ashish Chugh, Investment Analyst, one may prefer Transport Corporation of India (TCI), which is available at very reasonable valuations.
Ashish Chugh, Investment Analyst told CNBC-TV18, "I believe that logistics sector is one space which carries good potential and we may see increased activity as the market improves. There are a number of triggers which are there in this sector. One is the implementation of GST would be a big trigger for the sector. Then there is a lot of organized retail happening and there is an opportunity for supply chain logistics in this space.”
He further added, “There is a lot of online e-commerce trade happening. If you see Flipkart, this company recently got funding from investors and the investors valued this company at Rs 9,000 crore. A part of this valuation which is on account of front end and sourcing, but I think a significant portion of this valuation would consist of the backend and delivery to the customer. So I think the already organized listed companies in the logistic space are probably much more valuable than the valuations at which these companies are quoting.”
“Transport Corporation of India (TCI) has got more than 1,000 offices. They have got call centers. They have got warehouse space of close to 10 million square feet. It does a top-line of roughly Rs 2,000 crore, out of which express cargo division which is the XPS division contributes about Rs 450 crore and supply chain division is another Rs 400 crore. So I think there is a lot of potential of growth in these two businesses.”
“The company does an EPS of roughly Rs 9 on a consolidated basis and at the current price of about Rs 53-54 it has traded just at about 6 times its earnings. So I think given the potential which is there in this sector and the opportunities which are available in the sector, TCI is one company which is available at extremely reasonable valuations and there are not too many options available for investment in the logistic sector in India in the listed space. So anybody looking at logistics space would probably look at this kind of a company and from an investor’s perspective this company has never failed to give dividends in past 15 years. So I think it is a good company available at very reasonable valuations.”
Disclosure: The analyst has no personal investments in Transport Corporation of India.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.