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Friday, August 3, 2012

CONTAINER CORPORATION OF INDIA LTD: Think Container Think CONCOR !!!

Scrip Code: 531344 CONCOR
CMP:  Rs. 959.40; Buy at Rs. 940 - Rs.945.
Medium to Longer term Target: Rs. 1020; 
STOP LOSS – Rs. 875; Market Cap: Rs. 12,388.66 Cr; 52 Week High/Low: Rs. 1133.90 / Rs. 800.55
Total Shares: 12,99,82,794 shares; Promoters : 8,19,99,802 shares –63.09 %; Total Public holding : 4,79,82,992 shares – 36.91 %; Book Value: Rs. 450.50; Face Value: Rs. 10.00; EPS: Rs. 68.38; Div: 155 % ; P/E: 13.94 times; Ind. P/E: 13.33; EV/EBITDA: 10.15.
Total Debt: NIL; Enterprise Value: Rs. 12,212.92 Cr.

CONTAINER CORPORATION OF INDIA LTD: The Company was incorporated in 1988 and is based in New Delhi, India. Container Corporation of India Limited operates in the Railroads, line-haul operating sector. It provides Multi-modal logistics support services for export and import, and domestic trade and commerce in India. It primarily engages in carrier business, as well as provides freight transportation services by rail and road and providing inland transport by rail for containers, ports, air cargo complexes and cold chains. The company’s business includes three distinct activities, that of a Carrier, and container terminal operator and warehouse operator - which provides various facilities, including warehousing, container parking, repair facilities, and office complexes. In addition, it operates in two divisions – EXIM & Domestic, both the divisions provides services including transit warehousing for import and export cargo; bonded warehousing, enabling importers to store cargo and take partial deliveries; less than container load (LCL) consolidation, and reworking of LCL cargo at nominated hubs; and air cargo clearance using bonded trucking. All the activities of the company revolve around this business and all its operation are in India. As of March 31, 2011, the company operated a fleet of approximately 15,579 containers, 55 reach stackers, 14 gantry cranes, and 61 container terminals of which 18 are export-import container deports and 13 domestic container depots, as well as 10,666 wagons. CONTAINER CORPORATION OF INDIA LTD is compared to Gati Ltd and Allcargo Logistics Limited nationally and with CJ Korea Express Corporation globally.

Investment Rationale:
CONCOR enjoys a nearly monopolistic situation in the transportation of Containerised cargo through the Indian railways. Container Corporation of India (Concor) is a mini-Ratna Central PSU. The company has unveiled its big plans for Odisha. The logistics solutions provider is keen on setting up multi-modal logistics parks in nine key industrial hubs of the state. The new logistics parks are all set to come up at Jharsuguda, Angul, Paradeep, Dhamara, Kalinganagar, Gopalpur, Rayagada, Balasore and Rourkela. Each of these logistics parks would need 30 acres of land and the investment would be in the range of Rs. 50 – Rs. 100 crore. Each park would generate indirect employment for around 3,000 people. The logistics parks will include facilities like warehouse, distribution centers, storage areas, offices, truck services, parking lots, truck terminal, container rail terminal, container handling facilities, cold storages, air cargo points. The establishment of logistics parks would give a big boost to the state's industrial competitiveness. In addition to this such parks would be equipped with weighbridges, telecommunication facilities, banks, health awareness units and recreation centers. The logistics parks to be developed on the public private partnership (PPP) mode, would be served by roads, railways, inland water ways and air ways. Besides logistics parks, Concor is also planning to set up its cold chain infrastructure in the state. Initially, the company wants to set up three such cold chain facilities in the state for storage of green vegetables and other perishable food products. It is also keen on having a dedicated cold storage unit at Bolangir in western Odisha. Besides this the National Horticulture Board along with the Container Corporation of India has flagged off an ‘onion’ freighter from Nashik to Kolkata. About 1,400 tonnes were shipped in 90 special containers, which have been designed to keep the agriculture produce dry and well ventilated. Traders are increasingly attracted to this mode of transport as their produce incurs minimal damage and saves time. Using the railway network, the onions can reach the hinterland faster. Since August last year, the NHB, along with Container Corporation of India (Concor) had been carrying out similar test runs for farm produce such as bananas and potatoes.

Outlook and Valuation:
The company had taken a tariff hike of about 5 % on the key JNPTNVR route to cover increasing operating cost with effect from 15 Nov 2011. This hike in realisation was an offset to some extent by falling lead distance with some originating volumes shifting from JNPT to Pipavav and Mundra for the company. The realization have also increased in the domestic segment, as it has passed a significant portion (not entirely) of the rail haulage hike by Indian Railways (IR) to the customers. Concor today has a cash balance of over Rs. 2,700 Cr on its balance sheet which would yield the company around 9 % to 10 % per annum (versus 7.5 % yield YoY). Company's Q1 net profit was at Rs. 245 Cr v/s Rs. 234 Cr YoY and the income from operations was Rs. 1037 Cr v/s Rs. 949 Cr YoY. Concor faces intense competition from private operators like In logistics Solutions, Boxtrans Logistics, Gateway Distriparks and Arshiya International as private container rail business is growing gradually which forces these players to have tie-ups with Concor for shipping lines cargo to drive their Exim volumes. Most private players have also accelerated their expansions and rolling stock addition programme to get a share in the Exim business. For instance, GDL which currently operates 21 rakes would be adding further 6 rakes in the next two years. Also their Faridabad ICD has become partly operational in Q3FY12.While Concor is going slow with their capacity expansion programme. It is expected that the Operational performance & cash flow generation will continue to be healthy even though operational performance of Concor is not at historical high (ROE has fallen from 25 % in FY07 to around 16 % in FY12), still it has one of the highest operating margins of 25 % (Vs. 17 % of GDL). The key reason for fall in ROE for the company is the fall in asset turnover - the asset turnover for Concor has fallen from 0.97 in FY08 to 0.70 in FY12. Similarly asset turnover has impacted the ROCE of the company. This is primarily due to competition where the asset + additional capex are not translating into revenue and profitability as it did historically for Concor. Another comforting factor is the Healthy balance sheet of CONCOR. Concor is of a zero debt company, with substantial cash balance and no funding issues. It is expected that Concor will spend around Rs. 1,652 Cr in FY13E towards capex from which Rs. 760 Cr would be for land acquisition. The cash balance of Rs. 2800 Cr and operating cash flow of about Rs. 1130 Cr in FY13E would very comfortably supports its capex issues. The company doesn't have to take high cost debt in these uncertain times. Concor management has guided for a revenue growth of 7.5 % in FY13E with sustained margins. Company can deliver 4 % volume growth on both Domestic and Exim for FY13E with sustaining operating margins at 25 %. The company added 5 rakes in Q1FY13, taking the total count of new rakes to 218, the company plans to add 30 more rakes in FY13. EXIM volumes this quarter stood at 5,32,539 TEU's (Twenty feet equivalent unit which is the standard size of container) which was higher by 6.2% YoY and lower by 0.6% QoQ. Domestic volumes during this quarter stood at 96,346 TEU which was lowered by 13% YoY & higher by 22.9% QoQ. The Exim realisation per TEU grew by 4.90% YoY & 2.4% QoQ to Rs.16,118/TEU, domestic realisation per TEU grew by 15.4% YoY & 1.7% QoQ to Rs.18,450/TEU. At the current market price of Rs. 959.40, the stock is trading at 13.05 x FY13E and 12.25 x FY14E. Earnings per share (EPS) of the company for FY13E could be seen at Rs. 73.50 and Rs. 78.30 for FY14E . It is expected that the company will keep its growth story intact in the coming quarters also with rationalization of haulage charges by IR or Pickup in containerized trade both in EXIM and domestic segment. One could BUY CONTAINER CORPORATION OF INDIA LTD with a target price of Rs. 1020.00 

KEY FINANCIALS FY11FY12FY13EFY14E
SALES (Rs. Crs) 3,828.10 4,060.90 4,588.60 5,211.10
NET PROFIT (Rs. Crs) 876.00877.90955.901,018.00
EPS (Rs.) 67.4067.50 73.50 78.30
PE (x) 13.70 13.70 12.60 11.80
P/BV (x) 2.40 2.20 1.90 1.70
EV/EBITDA (x) 9.70 9.00 8.70 7.60
ROE (%) 17.60 15.70 15.20 14.50
ROCE (%) 20.30 20.20 19.60 18.60

I would buy CONTAINER CORPORATION OF INDIA LTD with a price target of Rs. 985 for the short term and Rs. 1020 for the 6 month target. 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. 875.00 on every purchase. 

READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

Monday, July 23, 2012

ZEE ENTERTAINMENT ENTERPRISE LTD:A Business at inflection point !!!

Scrip Code: 505537 ZEEL
CMP:  Rs. 149.80; Buy at current levels .
Short term Target: Rs. 160; 
STOP LOSS – Rs. 137.81; Market Cap: Rs. 14,290.28 Cr; 52 Week High/Low: Rs. 152.00 / Rs. 105.55
Total Shares: 95,39,57,720 shares; Promoters : 41,84,72,440 shares –43.87 %; Total Public holding : 53,54,85,280 shares – 56.13 %; Book Value: Rs. 31.39; Face Value: Rs. 1.00; EPS: Rs. 6.44; Div: 150 % ; P/E: 23.25 times; Ind. P/E: 23.26; EV/EBITDA: 16.48
Total Debt: Rs. 1.90 Cr; Enterprise Value: Rs. 31,424.32 Cr.

ZEE ENTERTAINMENT ENTERPRISES LTD: Zee Entertainment Ltd was founded in the year 1982, based in Mumbai. Company was formerly known as Zee Telefilms Limited and changed its name to Zee Entertainment Enterprises Limited in January 2007. ZEEL, together with its subsidiaries, operates as a vertically integrated media and entertainment company in India. It operates in three segments: Broadcasting and Content, Education, and Film Production. The Broadcasting and Content segment develops, produces, and procures television programming and film content, and delivers through satellites, cable, and Internet. It broadcasts channels, such as Hindi general entertainment channels and regional language general entertainment channels, Bollywood channels, sports channels, English entertainment channels, alternate lifestyle channels. Company earns revenues by the way of advertisement and subscription revenues and syndication. The Education segment engages in distribution of software learning products; and provides education and training in information technology. The Film Production segment produces and distributes films. The company has a library housing approximately 1,00,000 hours from 80,000 hours of television content; and rights to approximately 3,000 movie titles. Effective March 29, 2010, Zee News Ltd. demerged its Regional General Entertainment Channel Business Undertaking and transferred its operation to Zee Entertainment Enterprises Limited It has operations in India, the United States, Canada, Europe, Africa, the Middle East, Southeast Asia, Australia, and New Zealand. ZEEL can be compared with Sun Tv Network Ltd, Network 18 Media & Investment Ltd and Television Broadcasts Limited.

Investment Rationale:
The management has not provided any guidance for growth in advertising revenues for the coming year, on account of poor industry environment. On subscription revenues, the company has guided for a low double digit growth on account of further gains from Mediapro. Content expenses of the company are likely to rise in the coming quarters, on higher costs of content and higher selling and distribution expenses on new channels and its marketing spending. The company had earlier guided for a loss of Rs. 65 Cr – Rs. 75 Cr in sports, and further investments of Rs. 50 Cr to Rs. 100 Cr on investments in new channels/ content. Zee Entertainment shall see a fairly strong growth in advertising revenues against the industry if the current trends in ratings are to be sustained. The company has launched new programs  in new formats, and so the company shall outperform media peers in advertising revenue growth in the coming year. ZEE’s JV named Mediapro has clearly created benefits for Zee Entertainment in excess of market expectation. And so the growth of 13 % in the domestic subscription revenues in FY13 along with the 10 % growth in expenses is factored in. And so, the result of these changes can been seen on PAT estimate & is believed that the company's improving competitive position, especially in the Hindi GEC space will have significant positive effect. The strong performance of Zee TV implies that Zee Entertainment revenues could move counter to the industry in the coming year, which is a significant positive.

Outlook and Valuation:
ZEE has launched a couple of new initiatives that include Ditto TV – it’s over the top platform, and channels Ten HD and Ten Golf. Till yet, the company's media initiatives have largely been in niches rather than mainline channels. The company has noted that the advertising revenues for the quarter were weaker in last year largely due to sports properties. The subscription revenues have shown a strong growth. On the above it is noted that the subscription revenues have been impacted positively by changing accounting methods for Mediapro which was from equity accounting to proportionate consolidation which added about Rs. 50.60 Crs to domestic subscription revenues for 9 months of this year, secondly, the same affected cost items- resulting in significant margin compression for the quarter, and lastly, the changes in treatment of forex items leaded to strong growth in items below EBITDA line, affecting PAT positively (relative to EBITDA). ZEE is investing in international businesses, which could accelerate overseas revenues over the long term. Even though the loss in sports division has often been considered a bane for ZEE, sports channels and HD will aid ARPU growth for ZEE over the longer term.  There is a huge under‐declared subscriber base of about 7.5 Cr (likely to come under its ambit post digitisation and MediaPro (a Joint Venture with Star) which will entail humungous potential for ZEE. Zee TV’s viewership rating is near its one‐year high, which makes ZEE well positioned for the fresh ad deals - ZEE TV has crossed the 250 Gross Rating Points (100 GRP means either that 100 % of targeted households are reached once per week or 1 % of them are reached 100 times in the week or any combination thereof, also called homes per rating points) mark after more than 1.5 years to strengthen its place as the No.2 behind Star Plus. This development has mainly come from a good performance of fiction shows. The full- year results are a better indicator of the performance of the company and so the company could show best performance at the PAT level as well as at the top-line. The subscription revenue growth & ad revenue growth which amounts to 20%-25% to its total revenues could be a key positive surprise on full year basis, and key negative for the year could be decline in selling, growth in other expenses. The Sports business losses has always been a headache for the company due to higher expenses on account of rupee depreciation, and partly on account of launches of new channels -Ten Golf and Ten HD. On the results, management has indicated that the company has, ex-sports, seen a positive growth in advertising revenues. ZEE reported 20.6 % rise in net profit for the quarter ended June 30,2012 at Rs. 157 Cr on back of strong advertising and subscription revenues. Advertising revenues for April - June rose 18 % to Rs. 447.2 Cr, while subscription revenue were at Rs. 364.2 Cr (Rs. 250.5 Cr from domestic & Rs. 113.7 Cr internationally) were up 19 % year on year. The company's consolidated operating revenue for June 2012 quarter also witnessed a 21 % increased at Rs. 843 Cr YoY while consolidated operating profit grew 50 % to Rs. 233.2 Cr. EBITDA & Net Profit margin stood at 27.7 % and 18.6 % respectively. During this quarter, ZEE TV averaged 215 GRPs recording a relatively share of 21.2 % among the top five hindi General Entertainment Channels & now No.2 GEC in terms of rating, also its market share in the prime time band improved significantly wherein ZEE TV averaged 122 GRPs recording a relative share of 23.1 %. At the current market price of Rs. 149.80, the stock is trading at 21.09 x FY13E and 14.98 x FY14E respectively. Earnings per share (EPS) of the company for FY13E and FY14E are seen at Rs. 7.10 and Rs. 10.00 respectively. With sturdy free cash flow generation of about Rs.1,000 Cr with minimal debt, it is expected that the company will keep its secular growth story intact with stable dividend policy will make ZEE the best stock to own in defensive space. One could BUY ZEE ENTERTAINMENT ENTERPRISES LTD with a target price of Rs. 200 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 160.00 

KEY FINANCIALS FY11 FY12 FY13E FY14E
SALES (Rs. Crs) 3,008.80 3,040.50 3,276.60 3,656.90
NET PROFIT (Rs. Crs) 605.50 590.60 632.90 751.60
EPS (Rs.) 6.30 6.10 7.10 10.00
PE (x) 21.50 23.50 22.00 18.60
P/BV (x) 3.90 3.60 3.10 2.90
EV/EBITDA (x) 14.80 17.20 14.40 11.60
ROE (%) 17.50 18.10 17.30 18.10
ROCE (%) 18.10 18.40 17.20 17.50

I would buy ZEE ENTERTAINMENT ENTERPRISE LTD with a price target of Rs. 160 for the short term and Rs. 200 for the medium to long term target. 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. 137.81 on every purchase. 

READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

Friday, July 13, 2012

TALWALKARS BETTER VALUE FITNESS LTD : Spreading Fitness !!!

Scrip Code: 533200 TALWALKARS
CMP:  Rs. 173.20; Buy at Rs.166 - Rs.170 levels.
Short term Target: Rs. 190; Long term Target Rs.250; 
STOP LOSS – Rs. 158.00; Market Cap: Rs. 417.68 Cr; 52 Week High/Low: Rs. 265.00 / Rs. 107.00
Total Shares: 2,41,15,672 shares; Promoters : 1,43,45,723 shares –59.49 %; Total Public holding : 97,69,949 shares – 40.51 %; Book Value: Rs. 59.70; Face Value: Rs. 10.00; EPS: Rs. 7.96; Div: 10.00 % ; P/E: 21.75 times; Ind. P/E: 17.77; EV/EBITDA: 15.79
Total Debt: Rs. 111.38 Cr; Enterprise Value: Rs. 529.06 Cr.

TALWALKARS BETTER VALUE FITNESS LTD: The Company was founded in 1932 and is based in Mumbai, India.  Talwalkars Better Value Fitness Limited (TBVF) was formerly known as Talwalkars Better Value Fitness Private Limited. The company operates a fitness chain in India. The company offers a suite of services, including gyms, spas, aerobics, nutrition counseling, physiotherapy guidance, yoga classes and health counseling under the ‘Talwalkars’ brand.  The Company has an 8,000 square feet residential training academy at Thane. The training academy offers about 4 to 6 weeks of training program for its staff joining at the new centers.  As of May o4 2012, it had 102 health clubs and 62 cities and had more than 75,000 members. Its health clubs/training centers are located in Andhra Pradesh, Gujarat, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh and West Bengal. In April 2012, through its subsidiary Talwalkars opened a health club in the of Gandhinagar.

Investment Rationale:
The management stated that they have put hold on the plans to roll out clubs which was a different format compared to gym which required much larger investments and a longer gestation periods which would have had a dilutive effect on return ratios (RoE, RoCE) in the near term so the plans has been put on a hold. It would continue to focus on gym expansion where it remains bullish on the opportunity in the market given the low penetration rates for organized players. 
TBVF has rolled out 19 gyms in 9M FY12 and it is slated to launch another 16 gyms in Q4, a traditionally strong quarter for the fitness business. This would take its total gym base to 126 of which about 90 would be owned and rest would be through a combination of subsidiaries, franchisees/JVs and HiFi gyms. Company plans to add 8 HiFi gyms in the current year through franchisee route which would not entail any capex for the company. In order to accelerate roll out in Tier II & Tier III cities, Talwalkars has conceptualized gyms under the ‘HiFi’ brands. These would be rolled out in areas with population of 3,00,000 – 5,00,000 which otherwise may not have supported a fully fledged Talwalkars gym. For instance, company has targeted HiFi gyms roll out in cities like Porbander, Faridabad and Solapur. These are typically ‘no frills’ gyms with area of 2,500 - 2,800 sq ft & about half of that is for a regular gym. HiFi gyms capex requirement is about half of a full service gym and their membership rates are also 60 % more of those of regular gyms. The company would roll out HiFi gyms through the franchisee route thereby eliminating funding needs for the roll out. In return for gym management, TBVF will earn royalty income at the rate of 6 % of revenues for first three years and 8 % thereafter. Talwalkars would also receive a one-time royalty income and equipment supply charge to the tune of Rs.10,00,000 each. HiFi gyms offers faster roll out since each roll out usually takes 8-10 weeks as compared to 14-16 weeks for typical Talwalkars gym and so HiFi gyms is the better road for Talwalkars to go ahead.

Outlook and Valuation:
Gym is a highly localized business in the sense it needs to be easily accessible to local population at an affordable price (at least from a mass market perspective). Talwalkars has managed to break away from its peers and now leads the scale with 109 gyms on consolidated basis. There is a vast opportunity exists for further scale building considering the fragmented nature of industry. For instance, market share of the top 5 players by number of clubs is just 16 % as compared to global top 5 average which is about 40 %. Talwalkars has a decent spread-out across the North, West and South regions which together accounts for 94 % of the total gyms. It is also targeting different price segments with roll out of both Regular as well as ‘Low Cost’ HiFi gyms especially in those tier II/III cities which may not support a full service Talwalkars’ gym. Membership growth too has kept pace with volume additions as seen from a 31 % membership CAGR over FY07-12 as compared to 29 % CAGR in gym base. Talwalkars is likely to incur about Rs. 1.8 Cr in capex per gym roll out while it would have shouldered about half the needs in case of a subsidiary. Since HiFi gym expansion would be largely through franchisee route, Talwalkars would not have to incur the capex for these gyms. Talwalkars is expected to add about 96 gyms in FY13-14 with 77 % of the gyms added under owned and HiFi brands. Accordingly, it is expected that the Capex/Sales ratio to decline to 21 % in FY13 from 45 % in current fiscal. On the pricing front, company intends to hike membership fees by 8 % for new gyms (<1 year of ops) from April’ 12. Given the largely fixed nature of costs it is expected that the operating leverage benefits to kick in over FY13/14, factoring in OPM of 44.9 % /45.2 %. Given that roll outs in next 2 years would be more through subsidiaries and HiFi franchisees (63 % share of incremental gym adds), it is expected that the capex intensity to decline to 21 % in FY14 from 45 % in current fiscal. This would help generate free cash flow in FY14. TBFV is a play on the growing healthcare market in India. It has a strong brand name and is now capitalizing, with rapid expansion. There are not any listed comparable players and thus its closest comparable peers are the consumption companies like Jubilant Food works, Page Industries, Titan Industries etc which trades at an average PE of 30 x FY13. At the current market price of Rs. 173.20, the stock is trading at 15.46 x FY13E and 11.47 x FY14E respectively. Earnings per share (EPS) of the company for FY13E and FY14E are seen at Rs. 11.20 and Rs. 15.10 respectively. It is expected that the company will keep its growth story intact in the coming quarters also. One could BUY TALWALKARS BETTER VALUE FITNESS LTD with a target price of Rs. 190.00 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 250.00 

KEY FINANCIALS FY11 FY12 FY13E FY14E
SALES (Rs. Crs) 92.80 117.20 160.50 202.20
NET PROFIT (Rs. Crs) 16.00 20.50 26.90 36.50
EPS (Rs.) 6.70 8.50 11.20 15.10
PE (x) 23.50 18.40 14.00 10.30
P/BV (x) 3.00 2.26 2.20 1.90
EV/EBITDA (x) 11.70 9.30 7.00 5.50
ROE (%) 19.10 15.20 17.30 19.80
ROCE (%) 16.40 15.00 18.00 18.70

I would buy TALWALKARS BETTER VALUE FITNESS LTD with a price target of Rs. 190 for the short 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. 158.00 on every purchase.

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