Container Corporation of India - Sailing through rough waters... - Asit C. Mehta

Container Corporation of India Ltd. (Concor) reported Q2FY13 results that were lower than our estimates. The net sales were reported at Rs.10.5 bn, a growth of ~6% YoY against our expectation of Rs.10.9 bn. Revenues were lower than our expectations due to subdued volumes in both, the exim as well as domestic segment. The operating profit margin was reported at 24.2% (against 26.4% in Q2FY12), which was lower than our expectation of 25.4%. Subsequently, the net profit at Rs.2.3 bn increased by 4.6% YoY but remained lower than our estimate of Rs.2.5 bn.

We expect Concor to register a CAGR of 6.2% and 4.9% on the topline and bottomline respectively during FY11-14E. Moreover, Concor's inability to pass on the complete hike in the domestic rail freight charges and shrinking lead distances are matters of concern in the near term, which have affected the topline and bottomline growth in H1FY13.

However, we are positive on the long-term story of rail logistics with Concor's dominant position in terms of market share and handling capacity, along with upcoming logistics parks and expansion in cold chain logistics. At the current price of Rs.1,007, the stock is trading at a P/E multiple of 13.6x its FY13E EPS of Rs.74.3 and 13x its FY14E EPS of Rs.77.7. The stock is available at 9.5x its FY13E EV/EBIDTA and 8.6x its FY14E EV/EBIDTA. We value the stock at 13.5x its FY14E EPS and arrive at the target price of Rs.1,049. We recommend investors to 'HOLD' the stock at the current levels.

Source : Equity Bulls

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