Reiterate ADD on Container Corporation - To benefit from DFC, but LLF overhang remains - HDFC Securities

Mr. Aditya Makharia, Institutional Research Analyst, HDFC Securities

CONCOR's 3QFY21 PAT at Rs 2.4bn (+36% YoY) was above estimates as the CTO benefitted from higher realisations (+7% QoQ). While the company will gain from the commissioning of the Dedicated Freight Corridor (a portion of it has already commenced), the resolution of the LLF remains an overhang. The operator has levied a surcharge of Rs 5,000/TEU on import containers at its prime TKD terminal (which accounts for ~15% of EXIM volumes), to partially offset the potential higher levies. We reiterate our ADD rating on the stock and set the target price of Rs 520 at 22x on FY23E EPS as our estimates are increased marginally by 3% over FY22-23E.

3QFY21 financials: Volumes at 966k TEUs grew 6/9% YoY/QoQ, after six quarters of decline. Blended realisation was at Rs 18k grew 8/7%, driven by improved loads and increased leads. Revenue came in at Rs 17.5bn (+15/17%). EBITDA margin at 21.2% was higher by 40bps QoQ - the operating expenses included Rs 3.5bn as provision for LLF. Also, employee expenses included Rs 690mn towards employee welfare; this will be a recurring expense. Reported PAT came in at Rs 2.37bn (+36/27%).

Key takeaways: (1) Revision in volume guidance: With volumes recovering in domestic as well as EXIM segment, the management is now expecting a lower decline of 5% YoY in FY21 vs earlier guidance of 10% decline. (2) Resolution around LLF soon: As per IR's demand notice, for FY21, CONCOR has to pay Rs 13.37bn based on the extant policy of IR (at 6% of land value). The resolution around this is expected soon. However, CONCOR's assessment is Rs 4.5bn, and it has represented to IR for the same. (3) LLF surcharge: To cover the higher demand of railways, CONCOR has levied a land usage surcharge of Rs 5k/TEU at its flagship ICD Tughlakabad. As per the management, this has not affected any volumes. (4) DFC: The Rewari-Madar route is operational and trial runs have commenced up to Palanpur. CONCOR expects market share gains/improved profitability from higher double-stacked volumes, enhanced turnaround times, and timetabled train. (5) Others: IR has provided a 15 days period for exempting empty running charges in the current quarter.

Shares of CONTAINER CORPORATION OF INDIA LTD. was last trading in BSE at Rs.466.8 as compared to the previous close of Rs. 478.45. The total number of shares traded during the day was 186778 in over 6116 trades.

The stock hit an intraday high of Rs. 491.05 and intraday low of 462. The net turnover during the day was Rs. 89516955.

Source : Equity Bulls

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