Recommendation from Courier Services Sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

TIGER LOGISTICS (INDIA): KEEPING PACE WITH GROWTH OPPORTUNITIES

HERE IS WHY
✓ Among the top three customs house agents of North India
✓ Logistics sector to grow at CAGR of up to 9 per cent
✓ Exploring inorganic growth through acquisitions

India’s logistics sector, valued at USD 107.16 billion in FY23, is expected to grow significantly with the potential to reach USD 159.54 billion by FY28, showing a CAGR of 8-9 per cent. This growth is attributed to structural shifts, technological advancements and strategic government initiatives. The diverse logistics market includes road, rail, air cargo, multimodal logistics and industrial warehousing. The less-thantruckload (LTL) segment in road transportation is also expected to experience substantial growth.

Considering the growing scope of this sector, our recommendation for a low-priced investment is Tiger Logistics (India) Ltd (TLIL). The company is a third-party logistics services provider. Its business covers international freight forwarding, supply chain management, project logistics, defence logistics and cold chain logistics. The services provided by the company include international air freight, international ocean freight, and project logistics, domestic freight services, cold chain logistics, supply chain logistics and customs clearance.

The company’s primary focus lies in the automotive sector, which contributed 83 per cent to its revenues. Additionally, it caters to other sectors like logistics for defence, yarn and textiles, commodities, cold chain logistics, consumer durables and projects and heavy lifts. TLIL is exploring inorganic growth through acquisitions, targeting mid-size companies in the less-than-container-load space. The management is optimistic about future growth, citing potential increases in exports to the US and easing geopolitical tensions.

The company expects continued growth in both exports and imports, with an optimistic view on the automotive logistics sector. It is considering establishing a green logistics division to improve sustainability and appeal to corporates with environmental, social and governance (ESG) commitments. In the period Q2FY25, the company posted continued growth across various business verticals. Its air freight business has seen a 4.5 times year-on-year increase due to its acceptance as an IATA agent.

The financial health of the company is good, with short-term borrowings increasing for working capital purposes. In Q2FY25, on a standalone basis, its revenue increased by 198.96 per cent YoY to ₹160.17 crore compared to ₹53.58 crore from the previous year’s same quarter. On a sequential basis, the revenue increased by 58.33 per cent. The PBIDT excluding other income increased by 118.38 per cent to ₹8.79 crore YoY as compared to ₹4.03 crore from the previous year’s same quarter, while sequentially increasing by 69.99 per cent. The net profit stood at ₹7.54 crore compared to ₹3.22 crore, a YoY increase of 133.75 per cent, while sequentially increasing by 62.91 per cent from ₹4.63 crore.

At TTM, the shares of TLIL are trading at a PE of 39.1 times, which is higher than its three-year median PE of 15.7 times and higher than the industry PE of 16.9 times. The company’s solid financial performance is indicated by a three-year ROE of 28.1 per cent and ROCE of 37.9 per cent, coupled with a healthy three-year compounded profit and sales growth of 47 per cent and 13 per cent respectively. Considering these factors, Tiger Logistics (India) emerges as a promising investment opportunity. Hence, we recommend BUY.