Navkar Corporation (NCL) reported a good set of numbers for 1QFY2017. The
consolidated top-line grew by ~10% yoy while on the operating front, the
company reported a margin contraction on account of higher employee and
other operating expenses. The net profit grew by ~41% yoy due to lower interest
cost and higher other income.
Top-line grew ~10% yoy: The consolidated top-line grew by ~10% yoy to ~`90cr
led by higher volumes. NCL’s container volume handled stood at 81,866 TEUs
(twenty-foot equivalent units) in 1QFY2017. However, growth in revenue was
lower than volume growth, which rose by 15% yoy, primarily due to 6% yoy
decline in realization to `10,748/TEU on account of higher share of empty
cargoes at 5,300 containers vis-à-vis 1,200 in 4QFY2016.
PAT grew ~41% yoy: On the operating front, the company reported a margin
contraction of 318bp yoy to 42.4% on account of higher employee (up 103bp
yoy) and other operating expenses (up 215bp yoy) as a percentage of sales. As a
result, the EBITDA grew by ~2% yoy to `38cr. However, net profit grew by 41%
on back of higher other income and lower interest cost.
Outlook and Valuation: We estimate NCL to post a revenue CAGR of 32.7% and
PAT CAGR of 31.3% over FY2016-18E. We have factored in lower utilization
levels of 34.7% and 42.6% for FY2017E and FY2018E, respectively. At the current
levels, the stock is trading at 16.7x 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 when JNPT
posted flattish volume growth. Going forward, we expect NCL’s utilizations to
improve; we expect the company 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.
We maintain our Buy recommendation on the stock with a target price of Rs265.

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