Navkar Corporation (NCL) is one of the largest container freight station (CFS) at JNPT
and also one of the three CFS with rail connectivity that provides it an edge over its
peers. The current capacity stands at 310,000 TEUs and it has amongst the highest
market share at JNPT mainly owing to this rail advantage. Post the IPO, the company
is in a massive expansion mode and will be increasing its capacity at Somathane CFS
by 252,889 TEUs to 472,889 TEUs and is also coming up with an inland container
depot (ICD) at Vapi with capacity of ~474,000 TEUs and an adjacent Logistics Park.
Upcoming ICD to provide an edge: The Vapi region has a huge market potential as it
is a well developed industrial area. As per the Management and industry sources, the
Vapi region accounts for close to 27% of container volumes at JNPT. We believe that
ICD (with rail connectivity) will enable the NCL to garner a good portion of the
business from the region. At present, imports headed for the region have to get
custom cleared at CFS/ICD at JNPT and are then transported via road. With rail
transport being a more economical option compared to road, the imports should head
directly to Vapi ICD. As for exports from Vapi region, a large portion (~60%) is stuffed at
factory and transported to JNPT. However, the balance 40% or ~170,000 TEUs (less-thancontainer
load [LCL]) which is being transported via road and consolidated at JNPT, can be
consolidated at the ICD. Once the scale advantages kick in and given its rail advantage,
the company can also cater to some portion of bulkier factory stuffed cargo.
Capacity enhancement at Somathane to aid revenue growth: The company has
managed to outgrow its peers in the region by attracting volumes on the back of its
rail advantage. NCL has been facing capacity constraints at JNPT and is forced to
reject certain bulk commodities like PTA, Fiber, Scrap, Marble, etc. Although the
current South Gujarat volume of NCL (~70,000 TEUs) is expected to shift to the Vapi
ICD, the company will now be able to handle these bulk commodities and effectively
utilize its extended capacity. NCL will now also be handling domestic traffic, which it
had been rejecting earlier, thus aiding growth.
Logistics park at Vapi to be an additional revenue driver: The logistics park will be a
one-stop solution for importers and exporters, providing a host of warehousing and
other value added services. Its close proximity to one of the largest industrial clusters in
India augurs well for NCL.
Outlook and Valuation: We estimate NCL to post a revenue CAGR of ~26% and PAT
CAGR of ~31% over FY2015-18E. We have factored in lower utilisation levels of
33.2% and 42.2% for FY2017E and FY2018E respectively. At current levels, the stock
is trading at 18.0x its FY2018E earnings. Historically, NCL has consistently grown at
JNPT and increased its utilisation from 68% in FY2012 to 87% in FY2015 by
leveraging on its rail advantage during periods where JNPT posted flattish volume
growth. Going forward, we expect NCL’s utilizations to increase; we expect NCL to be
able to garner a good chunk of business over the next three to four years due to its rail
advantage at both JNPT and Vapi. Moreover, the capacity addition at JNPT port serves
as an additional long-term trigger for the stock. We initiate coverage on the stock with
a Buy recommendation and target price of `265 (23.0x FY2018E EPS), indicating an
upside of ~27% in the stock price from the present levels.

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