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[21 Oct 22] Newsletter: 30% OFF Diwali deal, TCI is Outlier, 5 Good Reads & More

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🔆 Quick glance

  • What’s up with markets: Crisp overview of markets & macros
  • What we are reading: 5 good reads from across the globe
  • What’s that outlier: A note on Transport Corporation of India
  • What’s on YouTube: Booming bank credit, Bajaj Finance & More

Diwali is the best time, for everything! 🪔

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[21 Oct 22] Newsletter: 30% OFF Diwali deal, TCI is Outlier, 5 Good Reads & More


What’s up with markets? 📉📈

Axis Bank is up a staggering 12.9% due to 70% YoY growth in net profits for Q2FY23. SBI & SBI Life had a successful week rising around 6% each. Nestle was also up 7.5% based on a better earnings report.

IndusInd has had a good 2022 and saw decent growth in Net Profits for Q2FY23. Yet, the stock tanked 3% this week mostly because of reduced margins and concerns around the quality of their loan book. JSW, Asian Paints, and L&T were also losers for the week when Nifty 50 was up a cool 2.3%.

[21 Oct 22] Newsletter: 30% OFF Diwali deal, TCI is Outlier, 5 Good Reads & More

USDINR closed at ₹82.8, down by 0.5 percent, while everyone tracks it closely. The rupee is certainly weakening but not as much as other currencies which means things are bad but relatively good. And that’s sometimes enough to keep the markets cheered up. Maybe that’s why Nifty is only 5% down from its All Time High while other major stock indices are tumbling. Crude, Gold & Silver were flattish over the week.

[21 Oct 22] Newsletter: 30% OFF Diwali deal, TCI is Outlier, 5 Good Reads & More

On valuations, price-to-earnings (PE) ratio for the Sensex was at 22.6, and there’s a graph below for historical comparison.

[21 Oct 22] Newsletter: 30% OFF Diwali deal, TCI is Outlier, 5 Good Reads & More

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What’s that Outlier?

Capitalmind Outliers is our in-house screening tool that helps you discover stocks with trends and momentum in their favor. Every week, we at Capitalmind discuss what’s behind an outlier standing out. This week, we have a Third-Party Logistics (3PL) player on the center stage: Transport Corporation of India.

TCI offers,

  • Multi-modal logistic services via its Freight business (~47% of overall revenue)—TCI is the only player in India to offer freight transportation across roads, rails, and seas. They run 12,000+ trucks, 150+ refrigerated trucks, and 3 freight trains, and offer coastal freight via their seaways business.
  • End-to-end logistics solutions via its Supply Chain Management business (~34% of overall revenue)—from design and engineering to warehousing (12 million sq ft).
  • Coastal freight services via its Seaways business (18% of overall revenue)—connecting India’s western, eastern, and southern ports, using their 6 coastal ships with a total capacity of ~78,000 dead weight tonnage. The freight business facilitates first and last-mile connectivity via road and rail.

In the past three years, the company’s revenue has grown ~6%, while operating profits have grown at a much higher rate of ~20%, as the company has focused on higher margin segments: Less-than Truck Load (LTL) in freight, SCM, and coastal freight.

The operating margins on the whole however are not that much, but this is expected in the logistics industry, which makes up for it by focusing on operational efficiency. This can be measured by asset turnover, calculated as how much sales a company is able to generate using all its assets. For TCI, asset turnover has averaged roughly 1.7 in the past three years.

[21 Oct 22] Newsletter: 30% OFF Diwali deal, TCI is Outlier, 5 Good Reads & More

TCI numbers aren’t unequivocally industry-leading, so why has TCI run up? Well they haven’t run up alone, a lot of third-party logistic players have:

[21 Oct 22] Newsletter: 30% OFF Diwali deal, TCI is Outlier, 5 Good Reads & More

Why have third-party logistics players run up? 

  • With GST, businesses now optimize for efficiency rather than optimizing for lower taxes, delays due to border checkpoints, and compliance scrutinies—thus, they are looking to outsource to end-to-end solution providers that offer flexible and scalable models
  • Favorable policies shaping up better infrastructure—dedicated freight corridors, multi-modal transportation, logistic parks
  • A shift towards outsourcing to the organized industry due to their pan-India scale, reputation, and tech-driven solutions.

Transport Corporation of India is one of many stocks that ranked Grade 10 on the Capitalmind Outliers platform this week. 

(Disclaimer: The information conveyed in this post is intended for informational purposes and shouldn’t be considered as investment advice. Please do your own research before making investment decisions)


What we are reading? 📝

One of these weeks, we will be happy to keep the gloomy macro, inflation headlines, and politically charged economic policies out of our reading lists. This week is unfortunately not that week.

  • The U.S. realized some of its most important economic bargaining chips with China were soon going to bite the dust. So, they used it without even calling China to the table? So, they became the first aggressors and announced a declaration of war? Read: Biden declares economic war on the Chinese semiconductor industry
  • With what happened in the U.K., can pension funds of other countries also be in trouble? Alfonso Peccatiello explains The Pension Funds Drama Explained
  • ‘Risk is a funny thing. No one stopped to think, “What happens next?” It’s only after these collapses happen that markets feel risky. But the risk already happened’, recalls Jack Raines in Rethinking Risk
  • ‘Since the 90s bust, Japan’s sideways markets have burnt many investors, who will not be inclined to think this time will be different. What is different now is that Japan’s weaknesses, demographic and otherwise, seem relatively less severe given that the rest of the world is facing inflation-driven problems that Japan may be in a uniquely strong position to handle.‘ Read: Looking at Japan
  • If you had to guess, how would a portfolio strategy of investing in companies with good brand recognition perform against benchmarks? Find out how much and why here: The value of a brand

What’s on Youtube? 🎙

Deepak Shenoy shares his insights on the booming bank credit growth in India with the latest macroeconomic data. Along with Nihit, he also discusses other events of the markets such as Bajaj Finance Results, and also takes up audience questions.

(If you have questions you would like to ask us, do join in live on Fridays at 4.)

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