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Mahindra Logistics : Non Mahindra clients growing higher than Mahindra; Subscribe -
Mahindra Logistics : Non Mahindra clients growing higher than Mahindra; Subscribe
Nirmal Bang | Published: 31 Oct, 2017  | Source :

Valuation and Recommendation

Over, FY15-  FY17 the company sales has grown at a CAGR of 17.5% wheras the Non Mahindra revenue has grown at a CAGR of 45.9% during the  same period and form 44.5% of revenue in FY17. Going forward, with the growth in the 3PL market size which is expected to grow at a CAGR of 19-21% over FY17-20, we believe Mahindra logistics, having a strong parentage support with presence in different verticals  and  asset light business model accompanied with a shift from unorganized to organized sector, will be able to capture the rising opportunity in the industry.  Adjusted Operating margins of the company are  at 3.6% in Q1FY18 mainly due to asset light model. Management expects margins to improve going ahead.

The  company  has  one  time  expense  of  consulting  charges  which  is expected to come in till FY18. Adjusting to that PAT for FY17 stands at Rs 60 cr Operating  cash  flows  of  the  company  stands  negative  due  to  high  TDS  as compared  to  tax  payable.  Since  the  company  has  asset  light  business  model, Adjusted  ROE  (excluding  Surplus  Funds)  came  in  at  33.77%  in  FY17.On  the valuation  front,  at  the  given  upper  price  band  of  issue  of  Rs  429,  Mahindra Logistics is offered at PE of 44.0x its Q1FY18 annualised Adj EPS of Rs 9.7 and EV / Adj Ebitda of 24.5x. We recommend subscribing to the issue.

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About Nirmal Bang

Founded in 1986 by Nirmal Bang, the Nirmal Bang is recognized as one of the largest retail broking houses in India, providing an array of financial products and services. Their retail and institutional clients have access to products such as equities, derivatives, commodities, currency derivatives, mutual funds, IPOs, insurance, depository services and PMS. The Group is headed by Mr. Dilip Bang and Mr. Kishore Bang.

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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.