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Result Update: Container Corporation of India Ltd - BUY - TP Rs.775 - Kotak

Posted On: 2018-08-05 07:48:20

Container Corporation has reported strong YoY increase in volume in Exim at 794,402 TEUs (+11.4% YoY) and similar growth in domestic at 142,559 TEUs (+9.7% YoY). But volumes failed to pick-up sequentially. Even realizations continue to remain under pressure. We believe the current market price factors the bad things that can happen to the company.

Key Highlights

- Concor Q1FY19 result highlights include 1) healthy improvement in volumes in the Exim segment with market share gains on YoY basis; 2) recovery of volumes in the domestic segment post implementation of GST; 3) falling lead distance which impacted revenue per TEU; 4) reduction in empty running cost and benefit of double stacking accruing to the company which supported the margins.

- Sales growth to Rs 15.6 bn (+7.7% YoY), improvement in gross margins, higher other income, higher depreciation and higher effective tax rate led to recurring PAT of Rs 2.53 bn in line with our estimate.

- Management has guided an overall volume growth of 10% in FY19.Increased double stacking, higher number of operational logistics park and improvement in business prospect bodes well for Concor. Recommend BUY with an unchanged TP Rs 775 at 28x FY20E.

Valuation and Outlook

- The quarterly performance highlights issues faced by Concor to maintain high market share and strong earnings growth simultaneously. The current margins have already factored in the falling lead distance and high empty running. Further benefits of double-stacking, lower empty running, higher number of operational logistics park, improvement in business prospect with Dedicated Freight corridor (DFC) in FY20E and improvement in global and domestic trade is estimated to improve the business prospects, revenues and operational performance for Concor. We expect the next few years to be game changer for Concor, especially FY20, when we expect the Dedicated Freight Corridor (DFC) to be partially operational.

Shares of CONTAINER CORPORATION OF INDIA LTD. was last trading in BSE at Rs.644.35 as compared to the previous close of Rs. 648.6. The total number of shares traded during the day was 89329 in over 948 trades.

The stock hit an intraday high of Rs. 656 and intraday low of 639.05. The net turnover during the day was Rs. 58027652.


Source: Equity Bulls

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