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Snowman Logistics (Snowman) CMP
Rs. 75
Target
Rs. 83
Rating
ADD
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Thomson First Call, Reuters Knowledge and Factset
How does our one year outlook change?
We maintain our positive stance on Snowman driven by its strong positioning
as market leader in the temperature controlled warehousing and emphasis on
consolidating its pallet capacities thereby improving yield per pallet. Captive
utilisation of transportation fleet and exiting non-profitable food services
business will further expand EBITDA margin offsetting the drop in revenue.
We have a TP of Rs. 83 based on 17x FY18 EV/EBITDA
While operating income witnessed a sharp drop of 16.1% Y-o-Y to Rs. 494mn
on account of reduction in fleet size to 293 trucks and exit from food services
business, we believe that focus on consolidation of existing pallet capacity will
result in higher realisation per pallet at ~Rs.4,450/pallet in FY17E from
Rs.4,139/pallet in FY16 supported by improved utilisation at matured
warehouses (realisation of 4,836/pallet in 1QFY17). Seasonal products such
as ice cream witnessed a 20% Y-o-Y drop, offset by fruits & vegetables and
confectionary resulting in flat revenue and EBITDA margin drop of ~120bps
yoy to 38.3% in warehousing division. Emphasis on frozen and chilled
products will drive EBITDA to CAGR of 30% by FY18E. Management targets
to increase mix of higher yield products coupled with higher utilisations
Captive utilisation of transportation fleet to support core operations will
improve its operating margins to ~18% in FY17 vis-à-vis ~16% in 1QFY17.
The captive utilisation increased from 60% to 66% Y-o-Y with expectation of
~80% utilisation by FY18E.
Capacity addition at Cochin (4,500 pallets) and Krishnapatnam (3,500 pallets)
will increase the pallet capacity to 106,500 by FY17. Expect capex of ~Rs. 850
mn over FY17 and FY18.
Financial summary
Year Revenue
(Rs. mn)
EBITDA
(Rs. mn)
EBITDA
Margin
PAT
(Rs. mn)
EPS
(Rs.)
P/E
(x)
EV/EBITDA
(x)
FY16 2,401 507 21.1% 206 1.23 61.1 27.3
FY17E 2,114 670 31.7% 146 0.9 86.3 20.5
FY18E 2,476 856 34.6% 252 1.5 49.8 15.7
Key estimate revision
FY17E FY18E
Old New Change Old New Change
Revenue 2,294 2,114 -7.8% 2,555 2,476 -3.1%
EBITDA 686 670 -2.4% 833 856 2.8%
Margin (%) 29.9% 31.7% 178 bps 32.6% 34.6% 198 bps
PAT 157 146 -7.3% 250 252 1.0%
PAT Margin 6.8% 6.9% 4 bps 9.8% 10.2% 41 bps
EPS 0.94 0.87 -7.3% 1.5 1.5 1.4%
All figures in Rs. mn, except EPS, which is in Rs. How does our 3 year Outlook change?
We believe Snowman is well positioned to take advantage of its leadership
position in a fragment temperature controlled warehousing with capacities
equivalent to cumulative capacity of next nine competitors. The company’s
diversified customer base is present in over 10 industrial sectors tackling
seasonality in demand.
Furthermore, Snowman will benefit from synergies arising from GDL widening
its reach to new ports and centralized monitoring. Snowman is expected to
further penetrate deeper into organised cold chain sector valued at Rs.150 Bn
expected to grow at a CAGR of 15%. We believe there is significant upside to
RoCEs as utilisation at newer facilities improves with rollout of GST leading to
increase in customers moving to hub and spoke model.
8th August, 2016
Bloomberg SNLL IN EQUITY
Shares o/s 167.09
Market Cap Rs. 13bn
52-wk High-Low Rs. 111-46
3m Avg. Daily Vol Rs. 269mn
Index BSETPSU
1QFY17 Update
Promoters 40.3
Institutions 5.7
Public 54.1
1m 3m 12m
SNLL -14% 40% -32%
Sensex 4% 12% 0%
MUKESH SARAF [email protected] +91 44 4344 0041
KRUPASHANKAR NJ [email protected] +91 44 4344 0098
Rating: ▼ Target price: ◄► EPS: ◄►
Page 2
Snowman Logistics (Snowman) CMP
Rs. 75
Target
Rs. 83
Rating
ADD Quarterly financial results
Quarterly Financial Results
Rs. mn\Period Jun-16 Jun-15 yoy % Mar-16 qoq %
Revenue 497 592 -16.1% 602 -17.6%
Total Expenditure 349 469 -25.6% 443 -21.2%
EBITDA 147 123 20.3% 159 -7.3%
Margin % 29.7% 20.7% 899 bps 26.4% 328 bps
D&A 98 67 47.7% 91 8.3%
EBIT 49 56 -12.3% 68 -28.1%
Other income 2 14 -82.5% 5 -48.5%
Net Interest exp (inc) 31 24 26.6% 31 -0.3%
PBT 20 45 -54.8% 42 -51.1%
Tax provision 2 -9 -126.4% -34 -107.3%
Tax rate % 12.2% -20.8% -158.5% -81.8% 9392 bps
PAT (Reported) 18 55 -67.2% 76 -76.4%
PAT (Adjusted) 18 55 -67.2% 76 -76.4%
Margin % 3.6% 9.2% -561 bps 12.6% -900 bps
Shares Outstanding 167 167 167
EPS (Reported) 0.1 0.3 -67.2% 0.5 -76.4%
EPS (Adjusted) 0.1 0.3 -67.2% 0.5 -76.4%
Revenue dropped by 16.1% YoY in 1QFY17 on account of ~42%
reduction in fleet size to 293 trucks in 1QFY17 and exit from food
services business
Topline decline was overshadowed by EBITDA margins improvement of ~900bps YoY to 29.7% supported by healthy
contribution from transportation segment offsetting ~120 bps YoY
drop in warehousing EBITDA
High depreciation and interest cost coupled with fall in other income
led to 55% drop in PBT
Increase in effective tax rate to 12.2% in 1QFY17 when compared to
(20.8)% in 1QFY16
Reported PAT for the quarter came in at Rs. 18mn, a YoY drop of
67%
Page 3
Snowman Logistics (Snowman) CMP
Rs. 75
Target
Rs. 83
Rating
ADD Segment wise financial summary
Division wise contribution
Transportation – Captive utilisation supporting core business
307
187
79.8% 79.8% 86.7% 91.3%
97.9% 104.6% 105.8% 85.9%
79.6%
20.2% 20.2% 13.3% 8.7%
2.1% -6.0% -6.9%
15.5% 20.4%
-30.0%
-10.0%
10.0%
30.0%
50.0%
70.0%
90.0%
110.0%
0
100
200
300
400
500
600
700
1Q
FY
15
2Q
FY
15
3Q
FY
15
4Q
FY
15
1Q
FY
16
2Q
FY
16
3Q
FY
16
4Q
FY
16
1Q
FY
17
Rs. (m
n)
Warehousing Distribution
Warehousing EBITDA Contribution(%) Distribution EBITDA Contribution(%)
370
501 293
6,85,676
5,75,449 5,57,015
63,784
5,190
90,149 -1,00,000
0
1,00,000
2,00,000
3,00,000
4,00,000
5,00,000
6,00,000
7,00,000
8,00,000
0
100
200
300
400
500
600
1Q
FY
15
2Q
FY
15
3Q
FY
15
4Q
FY
15
1Q
FY
16
2Q
FY
16
3Q
FY
16
4Q
FY
16
1Q
FY
17
Fleet Average Realisation (Rs. / Truck) EBITDA / Truck
Product mix - a critical component to EBITDA
Source: Company, Spark Capital Research
Pallet realisation and EBITDA
Source: Spark Capital Research
4,398 4,317 4,630 4,578
4,229 4,369 4,259 3,767
4,217
1,702 1,465
1,728 1,935
1,671 1,668 1,627 1,633 1,615
0
2,000
4,000
6,000
0
20,000
40,000
60,000
80,000
1,00,000
1Q
FY
15
2Q
FY
15
3Q
FY
15
4Q
FY
15
1Q
FY
16
2Q
FY
16
3Q
FY
16
4Q
FY
16
1Q
FY
17
Pallet (Utilisation) Average Realisation (Rs. / Pallet) EBITDA / Pallet
Page 4
Snowman Logistics (Snowman) CMP
Rs. 75
Target
Rs. 83
Rating
ADD Financial Summary
Abridged Financial Statements Key metrics
Rs. mn FY15 FY16 FY17E FY18E FY15 FY16 FY17E FY18E
Profit & Loss Growth ratios
Revenues 2,029 2,401 2,114 2,476 Revenues 32.3% 18.3% -12.0% 17.1%
Operating expenses 1,559 1,896 1,444 1,620 EBITDA 23.7% 7.6% 32.5% 27.8%
EBITDA 470 506 670 856 PAT 10.0% -17.0% -29.1% 73.4%
Depreciation 245 305 394 445 Margins
EBIT 225 201 276 411 EBITDA 23.2% 21.1% 31.7% 34.6%
Net Interest Exp / (inc) 78 71 110 95 EBIT 11.1% 8.4% 13.1% 16.6%
Profit Before Tax 147 130 166 315 PAT 12.2% 8.6% 6.9% 10.2%
Tax (100) (75) 20 63 Leverage & WC ratios
Adj. Net Profit 247 205 146 252 Debt to equity (x) 0.2 0.3 0.3 0.3
Balance Sheet (Rs. mn) Current ratio (x) 3.93 3.32 3.50 4.08
Shareholders Equity 4,181 4,391 4,536 4,789 Debtor days (Sales) 87 85 85 85
Loan funds 904 1,480 1,455 1,354 Creditor Days 10 22 13 13
Sources of funds 4,776 5,462 5,580 5,732 Working Capital Days (Sales) 77 63 72 72
Net block 3,366 4,417 4,798 4,705 Performance & turnover ratios
Investments 1 1 1 1 RoACE (%) 5.4 3.8 4.6 6.6
Capital WIP 230 265 - - RoAE (%) 6.0 4.0 2.6 4.5
Current assets, loans & advances 1,583 1,116 1,095 1,360 Total asset turnover (x) 0.49 0.47 0.38 0.44
Current liabilities & provisions 403 337 313 334 Fixed asset turnover (x) 0.48 0.43 0.33 0.37
Net Current Assets 1,180 780 782 1,026 Valuation metrics
Application of funds 4,776 5,462 5,580 5,732 Current price (Rs.)
Cash Flows (Rs. mn) Shares outstanding (mn) 167 167 167 167
Cash flows from operations 523 255 704 729 Market capitalisation (Rs. mn) 12,526 12,557 12,557 12,557
Cash flows from investments -903 -1,363 -498 -336 Enterprise value (Rs. mn) 12,592 13,826 13,742 13,461
Cash flows from financing 1,056 482 (147) (213) EV/EBIDTA (x) 26.8 27.3 20.5 15.7
Capex 946 1,391 510 353 Adj. Per-share earnings (Rs.) 1.48 1.23 0.87 1.5
Free cashflow (423) (1,136) 194 376 Price-earnings multiple (x) 50.6 61.1 86.3 49.8
Closing cash 837 211 269 450 Dividend yield (%) 0.7 0.0 0.0 0.0
75
Page 5
Snowman Logistics (Snowman) CMP
Rs. 75
Target
Rs. 83
Rating
ADD
Limited re-rating
potential
EBITDA per pallet to
improve from ~Rs.
464
Improving pallet
utilization of over
85% resulting in
revenue and EBITDA
growth of 7% and
21% respectively
FY12 FY15 FY16 FY17E FY18E FY19E FY20E
Pallet
Capacity
(‘000 Pallet)
18.1 85.5 98.5 106.5 112.0 120.0 126.0 ▲
Revenue
(Rs. Mn) 615 2,030 2,401 2,114 2,476 2,852 3,159 ▲
FY15 FY16 FY17E FY18E FY19E FY20E
EBITDA/
Pallet (Rs.) 430 464 444 523 547 564 ▲
Entry = Rs. 75 (implied
15.7x FY18E
EV/EBITDA)
Cumulative Dividends of
Rs. 0
Exit at 17x implied
EV/EBITDA
TOTAL RETURN OF 58%
Over FY16-20, Snowman
is expected to record ~7% /
23% revenue / EBITDA
growth. Revenue growth is
driven by increasing pallet
capacity utilization and
rising demand for
multipurpose temperature
controlled warehouses
with integrated transport
services. EBITDA growth is
expected to be driven by
improving yield per pallet
and increasing
contribution from
supportive services such
as transportation. FY20 EV/EBITDA Price (Rs.) 10.8x 118.7
Trading History – % of times stock traded
EV
/EBITD
A
<23x
23-
26x
26x-
35x
35-
38x
38x-
41x
41x-
44x
44x-
47x >47x
5% 5% 13% 17% 15% 18% 11% 16%
Crystal Ball Gazing
Page 6
Snowman Logistics (Snowman) CMP
Rs. 75
Target
Rs. 83
Rating
ADD Spark Disclaimer
Spark Capital Advisors (India) Private Limited (Spark Capital) and its affiliates are engaged in
investment banking, investment advisory and institutional equities and infrastructure advisory
services. Spark Capital is registered with SEBI as a Stock Broker and Category 1 Merchant Banker.
We hereby declare that our activities were neither suspended nor we have defaulted with any stock
exchange authority with whom we are registered in the last five years. We have not been debarred
from doing business by any Stock Exchange/SEBI or any other authorities, nor has our certificate of
registration been cancelled by SEBI at any point of time.
Absolute Rating Interpretation
BUY Stock expected to provide positive returns of >15% over a 1-year horizon
ADD Stock expected to provide positive returns of >5% – <15% over a 1-year horizon
REDUCE Stock expected to provide returns of <5% – -10% over a 1-year horizon
SELL Stock expected to fall >10% over a 1-year horizon
Spark Capital has a subsidiary Spark Investment Advisors (India) Private Limited which is engaged in the services of providing investment advisory services and is registered with SEBI as
Investment Advisor. Spark Capital has also an associate company Spark Infra Advisors (India) Private Limited which is engaged in providing infrastructure advisory services.
This document does not constitute or form part of any offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. This document is
provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Nothing in this document should be construed as investment or financial
advice, and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred to in this document.
Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. This document is being supplied to you solely for
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availability or use would be contrary to law, regulation or which would subject Spark Capital and/or its affiliates to any registration or licensing requirement within such jurisdiction. The securities
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Spark Capital makes no representation or warranty, express or implied, as to the accuracy, completeness or fairness of the information and opinions contained in this document. Spark Capital , its
affiliates, and the employees of Spark Capital and its affiliates may, from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities
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report.
0
20
40
60
80
100
120
140
Sep-14 Feb-15 Jul-15 Dec-15 May-16
Rs.
Price Target
Snowman Logistics – 3 Year Price and Rating History Report Date Price Target Reco.
27/Jun/16 72 83 Buy
Page 7
Snowman Logistics (Snowman) CMP
Rs. 75
Target
Rs. 83
Rating
ADD Disclaimer (Cont’d)
This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through an independent analysis by Spark Capital. While we would
endeavour to update the information herein on a reasonable basis, Spark Capital and its affiliates are under no obligation to update the information. Also, there may be regulatory, compliance or
other reasons that prevent Spark Capital and its affiliates from doing so. Neither Spark Capital nor its affiliates or their respective directors, employees, agents or representatives shall be
responsible or liable in any manner, directly or indirectly, for views or opinions expressed in this report or the contents or any errors or discrepancies herein or for any decisions or actions taken in
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incorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report:
Disclosure of Interest Statement Yes/No
Analyst financial interest in the company No
Group/directors ownership of the subject company covered No
Investment banking relationship with the company covered No
Spark Capital’s ownership/any other financial interest in the company covered No
Associates of Spark Capital’s ownership more than 1% in the company covered No
Any other material conflict of interest at the time of publishing the research report No
Receipt of compensation by Spark Capital or its Associate Companies from the subject company covered for in the last twelve months:
Managing/co-managing public offering of securities
Investment banking/merchant banking/brokerage services
Products or services other than those above
In connection with research report
No
Whether Research Analyst has served as an officer, director or employee of the subject company covered No
Whether the Research Analyst or Research Entity has been engaged in market making activity of the Subject Company; No
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The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s
compensations was, is or will be, directly or indirectly, related to the specific recommendation or views expressed in the report.
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This research report prepared by Spark Capital Advisors (India) Private Limited is distributed in the United States to US Institutional Investors (as defined in Rule 15a-6 under the Securities
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