>TRANSPORT CORP OF INDIA (CENTRUM)

■ Target price achieved: We had initiated Buy on TCI (Well integrated, dated 11 Dec 2008), with a target price of Rs51, providing an upside of 34.2%. The stock touched a high of Rs53 on 12 May 2009 and closed at Rs51.

■ Rating changed to Hold: Our target price of Rs51 was based on a P/E of 7x FY11E EPS and 4.6x EV/EBIDTA. We believe that the stock is fully valued and there is very little upside from current levels. Accordingly, we have changed our rating to Hold.

■ Warehousing capacity addition may be delayed: We believe TCI’s target of creating a total 10mn sq. feet of warehousing space by FY10 end may be delayed. The slowdown in the industrial and manufacturing sectors has dampened demand for value-added services in
supply chain solution (SCS) services.

■ Slowdown in industrial activity hits demand: Slowdown in industrial activity and lower EXIM volumes have resulted in lower demand for domestic logistics services and reduced movement of goods. IIP growth for March 2009 contracted 2.3% YoY while for FY09 it grew a modest 2.4% (vs. 8.5% in FY08). Exports declined 33.3% during March 2009 and imports declined 34.0%.

■ Maintain estimates, consolidated results awaited: We are maintaining our earnings estimates (consolidated) at Rs5.5 for FY10 and Rs7.3 for FY11. However, the company’s financials in the interim may be impacted by the current slowdown. We expect greater clarity from the management post the Q4FY09 and FY09 consolidated results (22 May 2009), after which we will review our projections.

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