Container Corporation of India - Kotak

In the last six months the following has emerged as positives for the company(1) Improving market share in the Exim segment (declining market limiting growth), (2) early signs of improving traffic (exports growing and outpacing imports) and (3) Improvement in margin in Q1FY14 (hike absorbed, empties rate cut, double stacking extension, hub and spoke pricing).

While being positive on long-term growth potential, we build caution in near term volume growth estimates. We estimate the company to deliver volume growth of 3% in FY14E and 5% in FY15E in Exim (versus guidance of 10%) and volume growth of 4% in FY14E and 5% in FY15E in domestic (versus guidance of 15%), We estimate operating margins to sustain at ~24% and ROE of ~15%.

We introduce FY15 numbers and change our rating to Accumulate from Reduce on the back of (1) healthy long-term volume growth (2) Concor's ability to maintain market share and margins (3) reasonable valuations. We value the company at 14 times FY15E EPS, a premium for its dominant market share, strong asset base, outperformance and strong balance sheet. Recommend ACCUMULATE with a TP of Rs 790 (earlier Rs 675).

Source : Equity Bulls

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