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Container Corporation - On Track; Volume Growth to Pick Up - Karvy
Posted On : 2012-07-26 10:56:57( TIMEZONE : IST )
Container Corp of India's (CCRI) Q1FY13 standalone PAT grew 5% YoY to Rs 2.45 Bn (marginally lower than our estimates of Rs 2.55 Bn). Revenues grew 9% YoY to Rs 10.4 Bn driven by EXIM revenue growth of 11% YoY while the domestic revenue remained flat YoY. EBITDA margins contracted 160 bps YoY to 25.8% on account of volume discounts provisioned for during the quarter in the EXIM segment and due to lower volume growth in the domestic segment. EBITDA rose 3% YoY to Rs 2.67 Bn. Other income rose 40% YoY led by higher treasury earnings as well as from disposal of older assets thereby boosting PAT growth to 5% YoY.
Volume growth to benefit as Indian Railways removed Sponge iron & Steel from notified list wef from 1st July 2012 thereby reducing the haulage charges on the same for the container train operators (CTOs). CCRI expects its domestic volume to pick up over the remaining three quarters. Additionally, the management expects the impact of depreciating Rupee on import volume loss to moderate going forward thereby boosting its total volume growth to ~9% during FY13-14E (We have factored in 8% volume growth in FY13-14E.
Re-introduction of telescopic cost benefit should further aid margin expansion for all the CTOs including CCRI as haulage charges under the hub and spoke model should come down for the CTOs.
CCRI plans to add 30 rakes in FY13E (vs. 5 in FY12) and has already added 5 rakes in Q1FY13. The rakes addition should boost its market share which has declined 60 bps YoY to 76.3%. It has a planned capex of Rs 16.5 Bn for FY13 towards rakes, equipments additions and land acquisition for logistics parks.
EBITDA and PAT CAGR of 11% and 7% during FY12-14E: We have lowered FY13-14E PAT estimates to factor in moderation in other income growth and higher tax rates. We estimate revenue, EBITDA and PAT CAGR of 12%, 11% and 7% respectively during FY12-14E. We believe CCRI's EBITDA margin to remain stable at ~26% led by its continued focus on improving the non-Rail handling earnings (22-25% of total revenue).
Re-iterate 'BUY' recommendation with a TP of Rs 1,080 valuing CCRI at 13x (15% discount to its long term median of 15x) its FY14E EPS (earlier Rs 1,115 at 13.2x its FY13-14E avg EPS).
