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Tuesday, July 3, 2012

SANGHVI MOVERS LTD: A Hidden Gem, Accumulate at every Dip !!!

Scrip Code: 530073 SANGHVIMOV
CMP:  Rs. 104.70; Buy at current levels. Short term Target: Rs. 110, 6 month Target – Rs. 150; STOP LOSS – Rs. 90; Market Cap: Rs. 453.22 Cr; 52 Week High/Low: Rs. 135. / Rs. 83.50
Total Shares: 4,32,88,000 shares; Promoters : 1,96,74,951 shares –45.45 %; Total Public holding : 2,36,13,049 shares – 54.55 %; Book Value: Rs. 124.94; Face Value: Rs. 2.00; EPS: Rs. 23.51; Div: 150 % ; P/E: 4.45 times; Ind. P/E: 9.19; EV/EBITDA: 4.07.
Total Debt: Rs. 639.25 Cr; Enterprise Value: Rs. 1085.45 Cr.

SANGHVI MOVERS LTD: The Company was founded in 1985 and is based in Pune, India. Sanghvi Movers Limited operates as a crane services company, Equipment rental & leasing sector in India and other parts of Asia. It provides heavy lift, plant erection, and maintenance services for various large scale projects. The company also offers over dimensional, heavy, and bulk cargo transportation services. It operates a fleet of 398 medium to large size hydraulic truck mounted telescopic and lattice boom cranes, and crawler cranes with lifting capacity ranging from 20 MT to 800 MT; and 132 hydraulic multi axle modular trailers. In addition, the company also engages in the generation of power from windmills. It primarily serves power, cement, steel, refinery, metros, windmill, and metal sectors. The Company operates in two business segments: Operations of Cranes and Power Generation. It earns regular revenue from the business of power generation from windmills commissioned in Jaisalmer, Rajasthan and Chitradurga, Karnataka. The Company's clients include Suzlon, Aditya Birla Group, TOYO, BHEL, Reliance, Vedanta Group, Siemens, Tata Steel, and Enron power, Samsung, Gujarat Ambuja and TISCO.

Investment Rationale: Sanghvi Movers Ltd is the 3rd largest crane services company in India, and ranked 7th largest in the world by Cranes International in June 2011 issue. Sanghvi Movers Ltd is undertaking an implementation of the turnkey projects, which includes providing of the well maintained equipment's,experts technical services and skilled manpower. The company carters to 75 % of the traditional Power sector crane requirement and 65 % of the Windmill sector’s crane requirement. The company has Crawler and truck mounted cranes and also has Hydraulic Multi Axle Modular Trailer. The company claims to have 98 % guaranteed machine availability with a timely deployment. The company has its owned state of the art Sanghvi Training Academy which provides high skills crane training programmes and produces highly skilled crane operators. Sanghvi Movers has 12 depots across the country to ensure timely deployment of cranes. The Indian logistics industry accounts for a mere 2 % ($100 billion) of the $5000 billion global logistics industry despite having the second largest network of roads at 3.83 million km, the fourth largest rail network of 63000 km, 128 airports, 12 major ports, 1 trans-shipment port and 187 non major ports. Indian Logistics sector grew by 8 to 10 percent annually over the last decade. There are several factors which have favorably impacted the growth of the logistics industry, like the country’s tax regime, growth across major industry segments such as automobile, pharmaceutical, fast moving consumer goods (FMCG) and the emergence of organized retail. Exim trade volume of India is growing consistently from last decade hence India is set to increase its share in global trade from less than 1 % now to about 1.6 % in 2012. India’s level of containerization is less than 25 % as against global average of 60 % - 70 %. An average time taken to clear import and export cargo at ports is about 19 days in India as against 3-4 days in Singapore. The trend towards containerization picked up in India in the last decade. Container traffic has seen a growth of 12 % CAGR in India from 2.5 million TEU in 2000-01 to 7.5 million TEU in 2010-11, seeing this and due to competitive advantage Sanghvi Movers is best fitted to tap in the growing trend of containerization. 

Outlook and Valuation:
Sanghvi Movers nearly has a monopolistic position in the high tonnage crane rental market in India. The Company is a great proxy to play the improving Indian infrastructure industry. The company is led by C.Sanghvi and his professional team, company has been able to maintain its competitive advantages in this sector. Company has its Economic Moat (A competitive advantage that one company has over the other companies in the same industry - by Warren Buffett)Especially in businesses, logistics is responsible for all the movement that takes place within the organization whether it is inbound logistics of incoming, raw materials or movement within the company or the physical distribution of finished goods and logistics encompasses all of these. A typical logistics framework mainly consists of physical supply, internal operations and physical distribution of goods and services. To put it more simple manner, the material supply logistics starts from the base level of “generation of the demand”, through the “process of purchase” and “supply of material from the vendor” right through to “final acceptance” and “payments to the supplier” and “issue to the indenter” and has to be considered as a “one whole activity” with each stage having an impact on price/cost of material supply. Logistics is, in itself, a system; it is a network of related activities with the purpose of managing the orderly flow of material and personnel within the logistics channel and as said before the Indian logistics industry accounts for a mere 2 % ($100 billion) of the $5000 billion global logistics industry and the trade volume of India is growing consistently from last decade & hence India is all set to increase its share in global trade from less than 1 % now to about 1.6 % in 2012, and Sanghvi Movers is well equipped for that. The company will also be benefited from the boost by the Prime minster of India on infrastructure development plans – Sanghvi Movers is a silent play to the infrastructure sector. During the quarter ended, the Net profit of the company increased to Rs.24.66 Crs and registering a growth of 13.53 %. Net Sales and PAT of the company are expected to grow at a CAGR of 16 % by 2014E. At the current market price of Rs.104.70, the stock is trading at PE of about 3.92 x FY13E and 3.54 x FY14E respectively. Company can post Earnings per share (EPS) of about Rs. 26.69 for FY13E and Rs. 29.54 for FY14E respectively. On the basis of EV/EBITDA, the stock trades at 1.17 x for FY13E and 1.05 x for FY14E respectively. It is expected that the company will keep its growth story intact in the coming quarters with the help of its competitive advantage. One can ‘BUY’ SANGHVI MOVERS at every given opportunity with a target of Rs.117.00 for Medium to Long term investment.

SALES (Rs. Crs) 361.25 450.47 509.03 565.03
NET PROFIT (Rs. Crs) 86.31 101.77 115.52 127.90
EPS (Rs.) 19.94 23.51 26.69 29.54
PE (x) 5.12 4.34 3.83 3.46
P/BV (x) 0.80 0.70 0.59 0.51
EV/EBITDA (x) 1.65 1.31 1.17 1.05
ROE (%) 15.53 16.22 15.55 14.69
ROCE (%) 30.20 34.53 34.84 34.55

I would buy Sanghvi Movies Ltd with a price target of Rs. 117 for Medium to Long term. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 90.00 on every purchases.



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