Chartered Logistics Ltd (Code 531977) - HBJ Capital's (MPS Unit) - Bus

CHARTERED LOGISTICS LTD: 

CHARTERED LOGISTICS LTD HBJ Capital, India Web: www.hbjcapital.com E-Mail: info@hbjcapital.com Call: +91 98867 36791 HBJ Capital’s “Business Insight” stock for the month of September 2010 Chartered Logistics Limited is into logistics sector and the company is on a phenomenal growth path. Company has been expanding at a rapid pace. It is undervalued in comparison to it's peers and the Government's commitment towards implementing Goods and Services Tax will favour the company in the long run.

Best Buying Price…: 

Best Buying Price… 2 Phase Buying Strategies Suggested [ Always buy in SIP ways] 1 st Phase : Buy at the current price range Rs 11-12.5 [40 % of investment] 2 nd Phase : Add if the price falls down to Rs 9-10 [60 % of investment] >>>Expect at least 10-12 times returns in next 3 years time frame!!! Note:- The above Best buying price is based on the E-mail communication sent to the “Penny Stock Package” subscribers on 20 th Sep’10 .

Slide 3: 

What Next? HBJ Capital – “Specialists in discovering multibagger stocks” is launching more & more innovative products & services with single focus on long term wealth creation!!! HBJ Cap is growing faster than ever. HBJ Capital can be your 50x in 3years investment. Ask how? Aim to become #1 - Equity Research Company in India by 2012, the same year we have planned to get it listed at BSE/NSE.

Table of Contents: 

Table of Contents From the Desk of CEO, HBJ Capital – (Page –5 ) Overview : Chartered Logistics Ltd. – (Page –7 ) The $125 Billion Indian Logistics Industry – (Page –10 ) EIC Framework – (Page –16 ) Chartered Logistics Ltd – (Page –17 ) Group companies of Chartered Logistics Ltd – ( Page –19 ) Network of Chartered Logistics Ltd – (Page –20 ) Intellectual behind Chartered Logistics Ltd – (Page –22 ) Peer Comparison – (Page –25 ) Financial Analysis – (Page –27 ) Investment Rationale – (Page –32 ) SWOT Analysis – (Page –35 )

From the desk of CEO, HBJ Capital: 

Supply Chain Management of India is weak which gives an opportunity for the companies which operate in Logistics segment to flourish. Out of the whole logistic industry only 10% is organized. The companies have a huge potential to grow in this area by tapping the unorganized sector. From the desk of CEO, HBJ Capital Dear Investors, Logistics is still a nascent and fragmented industry in India. It is estimated that while outsourced logistics accounts for 54% of total logistics spending in India, organized players have only 10% of the pie. In road transportation, which accounts for the biggest portion (36%) of logistics spending, 74% of operators are small-time players owning a single vehicle. In outsourced warehousing, 92% of players are from the unorganized sector. Even among the organized logistics players, few have offerings across multiple modes (air, water, rail and road) and services (transportation, warehousing and value-added services such as packaging, cold chain and customs clearance). A lack of adequate infrastructure and complex taxation and regulations are big hurdles. Government is taking initiatives to improve all this elements. Infrastructure investment in India is set to grow dramatically. As per Union Minister for Finance, Mr Pranab Mukherjee , India would require to develop a rupee-denominated long-term bond market for funding the infrastructure sector that requires an investment of around US$ 459 to US$ 500 billion by 2012.

Contd..: 

Contd.. As per the latest reports, US$ 218.3 million road project from the Gujarat government has been awarded to Reliance Infra, which indicates the improvement of infrastructure of Gujarat. The company which has been selected as the Business Insight pick for the month is from Logistics Industry, which is very promising and the company has recently bought 221 trucks which gives an idea about the expansion plans of the company. There are many players in this industry but very few could sustain for so long and CLL has managed to do this with good margins. The stock has been selected considering the area of operations i.e. Logistics, expansion program in place, undervaluation in comparison to it's peers and the Government's commitment towards implementing Goods and Services Tax which will benefit the Logistics industry the most. MPS is proud to bring you the “Business Insight” pick of the month – Chartered Logistics Ltd. Regards , Kumar Harendra, CEO, HBJ Capital, www.hbjcapital.com & www.multibaggerpennystocks.com #912, 1st "F" Main Road, Girinagar 2nd Phase,  BSK 3 rd Stage, Bangalore – 85 Call : +91 98867 36791, 080 6568 1133/34 Mail : Info@hbjcapital.com Web: www.hbjcapital.in

Slide 7: 

Overview

Slide 8: 

Chartered Logistics Ltd – Overview

Some key stats..: 

Some key stats.. PE = 15.3 - On the basis of annualized forward earnings the stock is available at a PE of 12-13 which is a discount compared to the industry standards. Book Value = Rs 3.23 - The current stock price at Rs 15.30 is trading at about 4.73 times its book value price. Shareholdings : No Of shares [% Share Holding ] Total Non-Institution: 1,16,32,714 Shares [23.42%] Total Bodies Corporate Holding: 7862761 Shares [15.83%] Total Promoters: 3,01,74,525 shares [ 60.75%] Total O/S Shares : 4,96,70,000 shares [100 %] Debt/Equity = 2.4 [Mar’10] ROCE = 18.3% [Mar’10] RONW = 28.6% [ Mar’10] Current Ratio = 1.3 [Mar’10 ] Delivered Volume per day = 73.56% BSE Code 531977 CMP = Rs 15.30 (September 27 th 2010) – The stock was suggested on 20 th September’10 when it was trading at Rs 11.47. Since then the stock has appreciated by almost 33%, while it touched a peak of Rs 15.30 52 week’s high/low = Rs 15.31/8.32 – The stock recently made a new 52 week high. As it is in the strong bullish phase it can continue to make new highs. Peak share price = Rs 15.30 ( 27 th September ‘10) – The stock scaled a new high on 27 th September ‘10. The stock deserves a re-rating and we may see CLL continue making new highs. Trading volume = Avg. 1.59 lacs shares (approx) per day – Earlier the volume was low however in the last few days the liquidity has improved with investors rushing in. EPS = Rs 1 – Company has recorded an EPS of Rs 1 on trailing twelve months basis.

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T he 125 B illion D ollar I ndian Logistics Industry !!!

..: 

.. Logistics Industry.. Globally, the logistics industry is valued at US$ 3.5 trillion. The U.S., which contributes to over 25% of the global industry value, spends close to 9% of its GDP on logistic services. The Indian Logistics Industry is presently estimated at US$ 125 billion. The industry has generated employment for 45 million people in the country in comparison with the IT and ITeS sector which employs approximately 4.3 million people. It is forecast to grow at a Compound Annual Growth Rate (CAGR) of approximately 8% over the next three to five years. (CII) Third Party Logistics (3PL) Solutions, is slated to grow at a compound annual growth rate (CAGR) of over 16% from 2007-10. Consequently, 3PL service providers are expected to corner an increased share of the Indian Logistics pie, from 6% in FY06 to 13% in FY11, at a CAGR of 25% (CII).

Contd…: 

Contd… The Indian Logistics Industry is presently estimated at US$ 125 Billion and is on a brink of a very high growth path. The industry is expected to reach revenues of approximately $ 385 billion by 2015. Consequently, 3PL service providers are expected to corner an increased share of the Indian Logistics pie from 8-9% to 13% in FY 11, at a CAGR of 25% Indian Logistics Industry will be one of the biggest beneficiary of the introduction of Value Added Tax (VAT) and the proposed introduction of a singular Goods and Services Tax. The same is expected to significantly reduce the number of warehouses manufacturers are required to maintain in different states, thereby resulting in a substantial increase in demand for integrated logistics solutions. A large number of upcoming SEZs have necessitated the development of logistics for the domestic market as well as for the global trade. About 110 logistics parks spread over approximately 3,500 acres at an estimated cost of $1 Billion are expected to be operational and an estimated 45 million square feet of warehousing space with an investment of $500 million is expected to be developed by various logistics companies by 2012.

Primary Growth Drivers: 

Primary Growth Drivers Investments in the infrastructure sector amounting to US$ 350 billion: Increased efficiency and productivity of the transport system would result in lower transit times. Streamlining of the indirect tax structure: The introduction of Value Added Tax (VAT) and the proposed introduction of a singular Goods and Services Tax (GST) are expected to significantly reduce the number of warehouses manufacturers are required to maintain in different states, thereby resulting in a substantial increase in demand for integrated logistics solutions. Strong economic growth and liberalization have led to considerable increase in domestic and international trade volumes over the past five years. Consequently, the requirement for transportation, handling and warehousing is growing at a robust pace and is driving the demand for integrated logistics solutions. Globalization of manufacturing systems coupled with advancements in technology are increasingly compelling companies across verticals to concentrate on their core competencies and avail the cost saving potential of outsourcing. This is expected to contribute to an increase in the need for integrated logistic solutions, which is the niche of every Third Party Logistics Service (“3PL Services”) provider.

FDI Regulations: 

FDI Regulations A snapshot of the FDI regulations governing the industry is as under: 1] 100% FDI under the automatic route is permitted for all logistic services except services mentioned in points ii and iii below. 2] FDI up to 100% subject to FIPB approval is permitted for courier services. 3] FDI up to 49% under the automatic route is permitted for air transport services, including air cargo services. The industry has been at the receiving end of increasing interest from the private equity sector. The year 2007 witnessed just under US$ 1 billion in private equity investments in this industry, representing approximately 7% of total private equity investments during the year, against 3% in the previous year.

Major Demand & Growth Drivers: 

Major Demand & Growth Drivers

EIC Framework..: 

EIC Framework.. Indian Economy Logistics Industry Chartered Logistic The Indian economy is expected to grow at 8.75%. The company’s growth is directly proportional to the growth of the country & industry. Company has taken a step towards expansion and trying to tap the unorganized sector. Well diversified companies have less risk and forward & backward integration makes the company more efficient in its operations and profitability.

Slide 17: 

Chartered Logistics Ltd.

Basic Details..: 

Basic Details.. Chartered Logistics, incorporated on Jun. 16, 1995, provides road transportation through a well integrated multi-modal transport system. Earlier known as Chartered Carriers, it got its present name on Nov. 30, 2007. The company is part of the group formed by Gyanchand Gandhi, which manages the business through a large fleet (approx. 900) of owned and attached vehicles and has been expanding it’s fleet at a rapid pace. The company offers transportation throughout India. Its own vehicles carry goods within Gujarat, Maharashtra and Rajasthan. Mr. Lalit kumar Gandhi is the Chairman & Managing Director of the company.

Group Companies..: 

Group Companies.. Chartered Motors Pvt Ltd: Chartered Motors carries on the tradition of allied transport business as the quality distributors of TATA motors across the markets of Bhavnagar, Amreli and Surendranagar of Gujarat for their LCV and ICV vehicles range. Chartered Health Care Ltd: Reading the radar of the growth right, the group has decided to diversify into the ever expanding sector of Pharmaceuticals and healthcare. Chartered Group has become Equity partner in GMbell Healthcare India Pvt. ltd, to partner the synergies of their expertise, and continue with the trend of the excellence. Chartered Speed Pvt Ltd: Managed by the dynamic duo of Mr. Lalit Gandhi and Mr. Pankaj Gandhi, Chartered Speed has core competence in providing the support to the modern roadways and transportation methods. Having recently bagged the contract from Ahmedabad Janmarg ltd, to provide the services for BRTS, the company is set to mark its presence in the industry. Raman Roadways The catalyst group Chartered institute of technologies

Branch Network (Pan India Presence)..: 

Branch Network (Pan India Presence).. Ahemdabad New Delhi Mumbai Mehsana Kolkata Bharuch Chennai Dahej Indore Hazira Thane Vapi Chiploon Tuticorin Haridwar Baroda Udaipur Dhungdhrara Ratnagiri Baroda Bhilwara Veraval Sirohi Road Gandhidham Abu Road Morbi Sheoganj Rananav Kodinar Kolhapur Nagpur GOA

Clients..: 

Clients.. Aditya Birla Group JMC Projects Ambuja cement Ltd JSW Steel Binani Cement Ltd Kalpatru Power Transmision Ltd BPCL Nova Petrochemicals Ltd Claris Life science Ltd Ratnamani Metals Dalmia Cement(Bharat) Ltd Reliance Industries Ltd Finolex Industries Ltd Reliance Retail Ltd Gujarat Sidhee Cement Ltd Saurashtra Cement Ltd Grasim Industries Ltd Secure Meters Ltd Heavy Metals Ltd Shah Alloys Ltd Hindalco Industries Ltd.(Unit Birla Cooper) Shree Cement Ltd Hindustan Unilever  Ltd Steel Authority of India Ltd (SAIL) Indian Oil Corporation Ltd Sterlite Industries(India)Ltd Indo Rama Cement Ltd Tata Chemicals Ltd J.K. Tyres Ltd Wolkem India Ltd

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Intellectual behind CLL

Management..: 

Management.. BOARD OF DIRECTORS 1. Mr. Lalit Kumar Gandhi Managing Director 2. Mr. Kishore Kumar Gandhi Executive Director 3. Mrs. Nisha Kalyan Whole Time Director 4. Mr. Mohib N. Khericha Director 5. Mr. Mangilal Bohra Director 6. Mr. Ajay C Shah Director 7. Mr. Sandeep Shah Director Mr. Lalit Kumar Gandhi is the Chairman & Managing Director of the Company, is having more than 15 years of experience in Transport, Finance & Marketing. He is in the board since 1995 & Company is leveraging on the experience of its MD. In the year 2008, Mr. Sandeep Shah came to the board, who is currently one of the director of the company. By Qualification he is a Chartered Accountant and M.Com . He is a real value add to the company’s panel. He is giving a lot of strength to the management by his sound knowledge on taxation and various strategies which helps to reduce tax burden on the company.

Share Holding Pattern..: 

Share Holding Pattern.. Promoter holding is more than 60.75% in the company. More than 1% of total shares of the company are held by following entities: Raj Raman Transport Pvt Ltd Websmith India Pvt Ltd Skyes &Ray Equities India Ltd Tirupati Shelters Ltd Hitesh Kekharchand Jain Vimal Bipinchandra Patel Dhaval Kekharchand Jain Nikhil Keharchand Jain The total of the above mentioned holding is more than 19%. The total holding (Promoter & these entities) comes nearly to 80% indicating the confidence of the promoters and investors of the company.

Slide 25: 

Peer Comparison

Peers Comparison : 

Peers Comparison Company Chartered Logistics Gati Limited Transport Corp of India Ltd Aqua Logistics Sales/Turnover (crore) 123 751 1451 322 Profit (crore) 4 15-20 43 20 NPM% 3.26% 2% 2.96% 6-7% Mcap (crore) 50 612 1050 1200 PE (Based on 20 th Sep’10 Price) 12.5 30-40 24.4 60 Jun’10 Profit (crore) 1.56 4.89 12.19 6.93 Jun’10 NPM% 4% 2.35% 3.10% 7.53% Expected PE 8.01 31.28 21.87 44.44 Above comparison clearly indicates the fact that the larger counterparts of CLL do not have any advantage in terms of Profit Margins. Rather CLL commands higher margins than most of the industry leaders. Comparison shows that P/E is usually high in logistics industry. While CLL is trading at a very low P/E, in future company is expected to perform better and would certainly command a high P/E.

Slide 27: 

Financial Analysis

Income Statement – Last 4 years: 

Income Statement – Last 4 years CLL has been a consistent performer for the last 4 years with a 17% CAGR in revenue and more than 58% CAGR in Net profit. In FY 2009-10 , the revenue decreased but because of the improvement in operational efficiency, the company reported higher operating and net profit margins. Phenomenal growth in EPS over last four years (Rs.2 to Rs.8) The improvement in operational efficiency can be gauged from the fact that the operating cost has decreased from 93% to 90.4%. In the last four years, there has been no major dilution and the growth has been funded by internal accruals and debt.

Income Statement – Quarterly : 

Income Statement – Quarterly A look at the results of the Mar’10 and Jun’10 quarter suggests decrease in operating cost to 88-89% of the revenue of the company against an average of 90.4% for FY 10. There’s been a sequential growth in revenue for the last 5 quarters. There’s a decline in margins for Jun’10 quarter over Mar’10 quarter but that’s on account of increase in interest burden. The company has piled on debt for expanding it’s fleet size of owned vehicles by almost 100%. The effect of the expansion will be evident in the numbers of the company from the forthcoming quarters.

Balance Sheet..: 

Balance Sheet.. The equity dilution has been insignificant and most of the debt raised has gone towards expanding the fleet size and warehousing capacity. Company has invested 94lacs in different shares, which are highly liquid and in the current bullish trend the company is going to leverage on it. Sundry Debtors have increased marginally but the company has received most of its dues extending beyond 6 months and these receivables are due for less than six months. Current Liability of the company is very low. Current ratio of the company is amongst the best in industry. The company has recently piled on more debt but the same has gone towards purchasing 221 trucks at a cost of Rs 40 crores.

Contd..: 

Contd.. The company has done well over the years especially since FY 05. The company has been reporting sequential growth since then and has been able to expand it's margins thus bringing in operational efficiency. The company has seen an exponential growth in it's bottom-line from Rs 0.23 crore at the end of Mar'05 to Rs 4.02 crore at the end of Mar'10. In the first quarter ending Jun'10, Chartered has come out with a stellar performance. The revenue for the quarter ending Jun'10 stands at Rs 39.6 crore, a 38% increase on YOY basis and 9.3% increase on QOQ basis. The net profit for the quarter ending Jun'10 stands at Rs 1.56 crore which is almost a 100% increase on YOY basis. The company is trading at a Forward PE (FY 11 earnings) of 8.64 which is approximately 1/4th of the PE commanded by it's larger counterparts like Gati , TCI, Aqua Logistics Ltd. There’s a high probability of PE re-rating in this counter.

Slide 32: 

Investment Rationale

Investment Rationale..: 

Investment Rationale.. The company is a long established player in the Logistics sector and is a part of a well known group with diversified interests. The Management holds 60.75% equity in the company while we feel that there cumulative (Direct + Indirect) holding in the company stands at around 71.5%. Over the period of last 4-5 years the company has not diluted it equity much, however they have been piling on debt. If one is to look at the Balance sheet of the company, then most of the debt of the company has gone towards increasing it's Gross block i.e. for expanding their fleet size and that's the primary reason why they have been able to post a good increase in turnover year on year. The company has recently bought 221 trucks for approximately Rs 40 crores . They have more than doubled their fleet size of owned vehicles and the effect of the same will start reflecting in the forthcoming quarters. The company is trading at a PE multiple of 8.64 based on it's annualized forward earnings, while the other listed companies like TCI, Gati , Aqua Logistics etc are commanding a PE of 30-40. Although company is a small player in comparison to the above mentioned counterparts, however it maintains one of the highest margins second only to Aqua Logistics Ltd. The company maintains higher margins than well established players.

Near Lifetime high…: 

Near Lifetime high… It is near life time high & will make new highs with the current trend. There is a strong support at 10.32. During the last few days the volume has increased and thus the recent spurt has been supported by heavy buying in the counter. Strong support @ 10.32 Huge volume

SWOT Analysis – Logistics Industry in India:: 

SWOT Analysis – Logistics Industry in India: STRENTGHS Extremely critical for Manufacturing Industry and Agricultural Commodity Industry No dearth in volumes Critical component in operational efficiency Contributes heavily towards customer satisfaction WEAKNESS High cost-low margin business. Large number of unorganized players. Low IT penetration. Highly fragmented. High Capital expenditure. THREATS Increase in fuel costs. Government Policy. Taxation. Recession. Competition. OPPORTUNITIES Implementation of GST from 1 st April 2011. Implementation of Golden quadrilateral and NS-EW corridors. Heavy investments to improve infrastructure through developmental projects like Mihan, Delhi-Mumbai industrial corridor and National Maritime Development Projects.

Disclaimer..: 

Disclaimer.. I don’t want 2 read this!! This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any other person. Persons into whose possession this document may come are required to observe these restrictions. This material is for the personal information of the authorized recipient only. The recommendation made herein does not constitute an offer to sell or solicitation to buy any of the securities mentioned. No representation can be made that recommendation contained herein will be profitable or that they will not result in loss. Information obtained is deemed to be reliable but do not guarantee its accuracy and completeness. Readers using the information contained herein are solely responsible for their action. HBJ Capital, or its representative will not be liable for the recipient’s investment decision based on this report. HBJ Capital, officers, directors, employees or its affiliates may or may not hold positions in the companies /stocks mentioned herein.

Slide 37: 

From, HBJ CAPITAL