Hello Sir,
Hope you are doing well.
I was recently reading about Lancer Container Lines.
Can you imagine, even in this bull run, the stock is down almost 60% from its highs of 105 odd levels and currently trading around 37.
I enjoy looking at such stocks because the idea is to find contra picks which are currently being ignored by the markets and may end up doing well over the next 2-4 years.
This stock came to my notice when I came across an announcement regarding preferential allotment of shares to Promoters at Rs 42/- per share towards conversion of outstanding unsecured loan to the company.
Below, we have shared our notes from the Q3 FY 24 con-call of the company to understand the outlook for the business.
Before that: Last week, we recommended a cyclical company related to food processing sector to our Alpha and Alpha + members
In last 10 years, the stock we recommended has gone through 2 major upcycles:
- FY 15 – FY 18 – From FY 15 lows, the PAT of the company increased 10x by FY 18 and the stock price increased almost 20x from lows
- FY 20 – FY 21 – In FY 20, the company incurred loss and in FY 21 the company recorded highest ever profit and the stock went up 5x from lows
FY 23 and FY 24 were again periods of downcycle. FY 25 started on a good note. Valuations are attractive and in case of an upcycle, it may again go through earnings and valuations rerating. You can read about it HERE
Lancer Container Lines – Notes from Q3 FY 24 concall
Lancer is in the business of shipping and logistics services in India and abroad. In Q3 FY 24, the company has increased containers, expanded into new geographies and established a strong foothold in key operating markets.
– TEU Growth and Future Plans:
- Added 3,200 TEUs in Q3, totaling 18,400 TEUs
- Plans to reach 20,000 TEUs by year-end and 40,000–45,000 TEUs by FY26
- Planning a Qualified Institutional Placement (QIP) to fund the addition of 30,000 TEUs in 1.5–2 years
– Revenue Decline and Margin Stability:
- Revenue decreased year-on-year and quarter-on-quarter due to lower freight rates
- Margins remain stable, supported by higher-margin geographies and fixed-margin customer contracts
– Red-Sea crisis:
- Halted Red Sea operations due to the ongoing crisis
- Focus shifted to other regions. Plans in the Mediterranean put on hold pending resolution of the Red Sea situation
– Joint Venture with Lotus Shipping Services:
- Formed SJ Shipping, a JV with a 51% stake by Lancer and 49% by Lotus
- Initial vessel operation between Mundra and Jebel Ali with a 600–800 container capacity
- Considering a 1,000 TEU vessel costing $7–8 million
- Charter cost for such a vessel estimated at $14,000–16,000/day
– Acquisition of Transco Logistics Worldwide:
- Acquired a 60% stake to boost freight forwarding capabilities
- Freight forwarding now contributes 10-12% of turnover, targeted to grow to 20-25%
– Margin and Cost Optimization:
- Maintaining a 13-14% margin; expecting growth as container additions reduce slot charges
– Route Expansion:
- Exploring opportunities in Africa, Latin America, Europe, the Mediterranean, and Western countries
- Plans to establish agency networks in new regions within 1–2 quarters
– Entry into Liquid Container Business:
- Launching Lancer Tank Containers with an initial purchase of 50 liquid containers
- Financing through self-accruals and QIP funds
- Targeting better margins compared to dry containers
- Planning to raise INR 300 crores through QIP for container purchases (dry and liquid) and vessel operations
(End)
Disclaimer: This is not a recommendation to buy/sell Lancer Container Lines. The securities quoted are for illustration only and are not recommendatory.
Best Regards,
Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.
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