Sell Container Corporation of India - Kotak

Concor reported Exim volume of 1.58 mn TEUs (-2% YoY) and domestic volume of 3.16 Lakh TEUs (-8%YoY) for 9MFY13. We estimate the company to report 2.1 mn TEUs in Exim and 4.26 lakh TEUs in domestic segment for FY13E and 2.2 mn TEUs in Exim and 4.43 lakh TEUs in domestic segment for FY14E.The growth would be very marginal on the back of declining global trade, deteriorating Exim imbalance, frequent rail haulage hikes and strong competition.

Frequent hike in haulage rates, competition and weak global trade would also keep margins under pressure. Company has also brought down its capex to Rs 9bn from Rs 16bn for FY13E. We estimate the company to spend around Rs 20 bn over the next 2 years on land, rakes, wagons and engineering equipment. However, Concor continues to have a strong balance sheet with cash of Rs 29 bn and is relatively better placed in the industry to peers.

In a slow growth competitive environment coupled with uncertainty of haulage hike by IR, we recommend our SELL rating on the stock with a target price of Rs 960.

Source : Equity Bulls

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