CMP* (Rs) 205 Upside/ (Downside) (%) 12 Bloomberg Ticker. NACO IN Market Cap. (Rs bn) 29 Free Float (%) 27 Shares O/S (mn) 143

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1QFY18 Result Update July 25, 2017 Market Cap. (Rs bn) 29 Free Float (%) 27 Shares O/S (mn) 143 Limited DPD Impact; Upgrade to (NCL) has delivered a decent performance in 1QFY18. Surpassing volume growth, its consolidated revenue grew by 9.6% YoY (flat on QoQ basis) to Rs988mn. Volume grew by 4.7% YoY (4.4% QoQ) to 86,073 TEUs, while realisation grew by 4.6%YoY (-4.5% QoQ) to Rs11,482/TEU. Realisation growth was aided by higher contribution from Vapi ICD and improved revenue-mix and lower share of empty cargoes, which stood at 4,524 in 1QFY18 compared to 5,300 in 1QFY17. EBITDA increased by 10% YoY and 11.6% QoQ to Rs390mn partly due to certain one-off expenses relating to: (1) loss on sale of asset; (2) employee bonus accounting post IND-AS; (3) higher operating and employee cost relating to Greenfield project at Vapi in both 1QFY17 as well as 4QFY17. However, NCL s adjusted PAT declined by 7.7% YoY (+7.3% QoQ) to Rs217mn largely due to higher tax outgo. Looking ahead, we expect limited impact from Direct Port Delivery (DPD) due to favourable exports-mix, while ramp-up at Vapi ICD is expected to start meaningfully contributing to NCL s overall sales in ensuing quarters. Hence, we upgrade our recommendation on the stock to from HOLD with an unrevised Target Price of Rs229. Share price (%) 1 mth 3 mth 12 mth Absolute performance (2.4) (4.9) (4.2) Relative to Nifty (6.5) (12.0) (19.7) Shareholding Pattern (%) Mar'17 Jun 17 Promoter 72.9 72.9 Public 27.1 27.1 1 Year Stock Price Performance 250 230 Capacity Ramp-up at Vapi ICD to Boost Volumes Container volumes handled by NCL including 5,780TEUs from Vapi ICD stood at 86,073 TEUs in 1QFY18, which translates into almost 100% capacity utilization at Panvel. Notably, excluding Vapi ICD, NCL s volume at Panvel fell by 2% YoY. Operations started at Vapi (Road + CFS) from 1QFY17 with attractive pricing of ~Rs23,000/TEU (blended package for CFS + Transportation) compared to ongoing rate of ~Rs35,000/TEU. At Vapi ICD, NCL handled 5,780TEUs in 1QFY18 compared to 2,886TEUs in 4QFY17 and 325TEUs in 1QFY17, respectively. Looking ahead, NCL s management pegs volume from Vapi at ~100,000TEUs in FY18 considering steady ramp-up by the local companies. However, we believe this is most unlikely to achieve considering a required run-rate of ~31,400TEUs/quarter for the balance three quarters. Though NCL has received all requisite approvals for the railway siding at Vapi ICD, inspection by GM (Railways) is only pending due to incessant rains, which is expected to commence only by mid Aug 17. 210 190 170 150 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Note: * CMP as on July 25, 2017 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Outlook & Valuation We believe that NCL continues to remain well-placed to cash in the expected rise in EXIM trade on the back of several initiatives undertaken by the Government. Further, the threat of new entrants in CFS & ICD (Inland Container Depots) industry is moderate as limited land availability at strategic locations would discourage the competitors. We expect limited impact from Direct Port Delivery (DPD) due to favourable exports-mix, while Vapi ICD ramp up is expected to start meaningfully contributing to NCL s overall sales in ensuing quarters. Hence, we upgrade our recommendation on the stock to from HOLD with an unrevised Target Price of Rs229. Key Financials (Rs mn) FY16 FY17 FY18E FY19E Sales 3,473 3,709 5,416 6,940 EBITDA 1,337 1,374 2,174 2,894 Net Profit 855 856 1,493 2,177 EPS (Rs) 6.0 6.0 10.5 15.3 DPS (Rs) - - 2.8 3.0 P/E (x) 34.2 34.2 19.6 13.4 P/B (x) 1.7 1.6 1.4 1.3 EV/EBITDA (x) 23.1 24.0 15.2 11.2 RoE (%) 6.4 6.0 9.8 12.9 Div. Yield (%) - - 1.6 1.7 Source: Company, RSec Research Research Analyst: Kunal Motishaw Contact: (022) 33201328 Email: kunal.motishaw@relianceada.com 1

Risks to the View ff Slower ramp-up of capacity at new facilities. ff Lower-than-expected container volume. ff Lower-than-expected realisation. Exhibit 1: Result Summary Consolidated (Rs mn) 1QFY18 1QFY17 yoy % 4QFY17 qoq % FY17 FY16 yoy % Total Sales 988 902 9.6 991 (0.2) 3,709 3,473 6.8 Other Income 12 43 (71.7) 31 (61.2) 131 232 (43.4) Total Income 1,000 945 5.9 1,022 (2.1) 3,840 3,704 3.7 Total Expenses 598 547 9.3 641 (6.7) 2,335 2,136 9.3 EBITDA 390 355 10 349 11.6 1,374 1,337 2.8 Interest 72 83 (13.5) 77 (6) 313 344 (9) Depreciation 54 52 5.1 46 17.5 201 193 3.9 Tax 59 27 114.6 55 5.8 136 176 (22.8) Reported PAT 217 235 (7.7) 202 7.3 856 855 0.1 Reported EPS (Rs) 1.5 1.6 1.4 6 6 Adjusted PAT 217 235 (7.7) 202 7.3 856 855 0.1 Adjusted EPS (Rs) 1.5 1.6 1.4 7.3 6 6 Ratios (%) EBITDA Margins (%) 39.5 39.3 35.3 37.1 38.5 Profit Margins (%) 22 26.1 20.4 23.1 24.6 Source: Company, RSec Research Exhibit 2: Operational performance Particulars 1QFY18 1QFY17 yoy % 4QFY17 qoq % Volumes handled (TEU') 86,073 82,191 4.7 82,406 4.4 Realization per TEU (Rs) 11,482 10,975 4.6 12,022 (4.5) EBITDA/TEU (Rs) 4,531 4,315 5 4,240 6.9 Source: Company, RSec Research 2

Profit & Loss Statement Y/E Mar (Rs mn) FY16 FY17 FY18E FY19E Revenues 3,473 3,709 5,416 6,940 growth % 5.6 6.8 46.0 28.1 Expenses 2,136 2,335 3,241 4,046 Operating expenses 1,437 1,635 2,437 3,053 Purchase of traded goods - - - - Employee expenses 246 317 395 493 Other expenses 452 382 409 500 EBITDA 1,337 1,374 2,174 2,894 growth % 11.8 2.8 58.2 33.1 margins % 38.5 37.1 40.2 41.7 Other Income 232 131 95 125 growth % 978.4 (43.4) (27.6) 31.6 Depreciation 193 201 317 335 growth % 27.0 3.9 57.7 5.7 Interest expenses 344 313 274 237 growth % 30.4 (9.0) (12.4) (13.5) PBT 1,032 992 1,679 2,447 growth % 28.7 (3.8) 69.2 45.8 margins % 29.7 26.7 31.0 35.3 Net Tax 176 136 186 270 as a % of PBT 17.1 13.7 11.1 11.1 Profit After Tax 855 856 1,493 2,177 growth % 16.9 0.1 74.4 45.8 margins % 24.6 23.1 27.6 31.4 Diluted EPS 6.0 6.0 10.5 15.3 3

Balance Sheet Y/E Mar (Rs mn) FY16 FY17E FY18E FY19E Equity and Liabilities Shareholders funds 13,371 14,227 15,249 16,913 Share capital 1,426 1,426 1,426 1,426 Reserves & Surplus 7,174 8,030 9,052 10,716 Share Premium Account 4,771 4,771 4,771 4,771 Minority interest 10 10 10 10 Non-Current Liabilities 4,797 5,658 5,127 4,651 Long term borrowings 4,382 5,207 4,557 3,907 Deferred Tax Liability net 388 421 539 710 Long Term provisions 27 30 32 34 Current Liabilities 1,580 1,549 2,031 2,477 Short term borrowings 300 250 250 250 Trade Payables (Creditors) 125 135 150 150 Other Current Liabilities 1,094 1,097 1,558 1,996 Short Term Provisions 60 66 73 80 TOTAL Liabilities 19,758 21,444 22,418 24,050 Non-Current Assets Fixed Assets 14,455 17,097 17,597 18,097 Tangible assets 11,706 11,936 17,097 17,597 CWIP 2,748 5,161 500 500 Goodwill on Consolidation 0.3 0.3 0.3 0.3 Long Term Loans and Advances C 1,252 1,314 1,511 1,738 Other non-current Assets 64 64 64 64 Sub-Total 15,770 18,475 19,172 19,899 Current Assets 3,988 2,969 3,246 4,151 Spare parts & Consumables (Inventory) 16 16 16 16 Trade Receivable (Debtors) 479 874 1,261 1,616 Cash and Bank Balance 3,097 1,688 977 1,032 Short Term Loans and & Adv 175 210 714 1,114 Other Current Assets 220 180 278 374 TOTAL Assets 19,758 21,444 22,418 24,050 4

Cash Flow Statement Y/E Mar (Rs mn) FY16 FY17E FY18E FY19E Cah flow from operating activites PBT 1,032 992 1,679 2,447 Adjustments Depreciation 193 201 317 335 Finance costs 344 313 274 237 Operating CF Before W/Cap Changes 1,569 1,506 2,269 3,019 Adjustments for change in w/cap Decrease/(Increase) in trade receivables 296 (395) (387) (355) Dec. /(Inc.) in short term loans & advances 68 (35) (504) (399) Dec. /(Inc.) in long term loans & advances (60) (63) (197) (227) Decrease/(Increase) in other current assets 12 40 (97) (96) Increase/(Decrease) in trade payables 9 10 15 - Inc. /(Dec.) in Other current liabilities 51 3 460 438 Increase/(Decrease) in Long term provision 1.8 2.3 2.2 2.3 Increase/(Decrease) in Short term provision 5.5 6.0 6.6 7.3 Cash Generated From Operations 1,953 1,075 1,568 2,390 Income Taxes Paid (176) (136) (186) (270) Net Cash Flow From Operations (A) 1,776 939 1,382 2,119 Cash flow from Investing Purchase or cons. of fixed assets incl. CWIP (3,253) (2,441) (183) (165) Proceeds from Sale of investments (50) - - - others (217.8) (368.4) (516.0) (498.3) Net CF Used In Investing Activities (B) (3,521) (2,810) (699) (664) Cash Flow from Financing acitivies Proceeds from Issue of Share Capital (Incl 5,077 Securities premium) Proceeds from/(repayment of) Long-term 78 825 (650) (650) Borrowings (net) Proceeds from/(repayment of) Short-term 20 (50) - - Borrowings (net) Finance costs (344) (313) (274) (237) Dividend and Dividend tax paid - - (471) (513) Net CF From Financing Activities - C 4,831 462 (1,395) (1,400) Net Cash Increase/(Decrease) In Cash 3,086 (1,409) (711) 55 And Cash Equivalents Cash & Cash equiv. at begin. of the year 11 3,097 1,688 977 Cash & Cash equiv. at end of the year 3,097 1,688 977 1,032 Key Ratio Y/E Mar FY16 FY17 FY18E FY19E EBITDA margin (%) 3,473 3,709 5,416 6,940 EBIT margin (%) 1,337 1,374 2,174 2,894 Net profit margin (%) 855 856 1,493 2,177 Net Debt: equity (x) 6.0 6.0 10.5 15.3 RoCE (%) - - 2.8 3.0 RoE (%) 34.2 34.2 19.6 13.4 5

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