Today I studied Transport Corporation of India (TCIL). It attracted as a "Graham and Dodd" kind of idea.
About TCIL from CRISIL's report:
TCIL is among the leading integrated logistic service providers in India and the only player in India’s logistics industry to offer the entire range of services, such as multi-mode transportation services comprising road, rail, sea, and air transportation. Its business risk profile is also supported by a strong infrastructure backbone and relevant partnerships in the logistics sector. Furthermore, with operations across four key logistic segments: freight, express cargo (XPS),supply chain solutions (SCS), and coastal shipping, TCIL’s revenue profile is fairly diversified. In 2012-13 (refers to financial year, April 1 to March 31) freight, XPS, SCS and coastal shipping contributed 40 per cent, 28 per cent, 26 per cent and 5 per cent, respectively, to TCIL’s overall revenues.
The market capitalization of the company is around 370 Crores against the book net-worth of 405 Crores. The company witnessed a revenue growth of around 20% each year from 2003 to 2007; followed by a moderate growth till 2011; and a nominal growth during the last two years. Following a similar trend, the price to book value went upto 4 times during the period of growth. It is after 10 years that the stock has gone below its book value.
I began with the analysis of the net-worth and assets. Reserves included a revaluation reserve of 14 crores on the face. But in 2008, 41 crores was transferred from revaluation reserve to other capital reserve directly. Thus the total revaluation reserve comes to 55 crores. Company has book investments of 33 crores, of which around 20 crores has been invested in subsidiaries. For arriving at an estimate economic net-worth, I reduced this amount too. Thus economic net-worth comes to around 330 crores.
On the interesting side, the share of higher margin divisions (XPS and SCS) has been increasing over the last couple of years. With the economic turnaround and growth in freight division, the stock can provide good returns.
Sticking to the book rules, I will keep an eye on the stock and re-evaluate if the capitalization falls another 15-20% from here. Till then I feel KCP Sugar and Tata Sponge remain a better alternative.