Container Corporation - Good results; ICD Khatuwas now connected to DFC - HDFC Securities

Mr. Aditya Makharia, Institutional Research Analyst, HDFC Securities

CONCOR's Q1FY22 PAT at INR 2.5bn, surprised positively due to improved loads, higher terminal charges, and operating leverage. As per the management's assessment, the land license fees (LLF) charges for FY22 are revised lower to INR 3.75bn (vs INR 4.5-5bn for FY21), based on the revised land rates (by railways). CONCOR though will go ahead with its proposal to incur an upfront charge of INR 60-70bn for using the railway land. The strategic Khatuwas terminal is now connected to the main DFC. We maintain our ADD rating on the stock with a target price of INR 720 at 28x Jun-23E EPS (our estimates have been marginally tweaked).

Q1FY22 financials: Volume, at 991mn TEUs, declined 6% QoQ. The average realisation remains stable at ~INR 18k. Revenue came in at INR 18bn (-7% QoQ). EBITDA margin, at 24% (vs 13.4/9.7% YoY/QoQ), surprised due to improved operating leverage. The company has provided INR 1.13bn towards LLF vs INR 2.2bn QoQ. CONCOR reported a profit of INR 2,549mn vs INR 779mn QoQ.

Key takeaways: (1) Improved margins: EXIM and domestic margins have both witnessed expansion in Q1FY22, led by improved loaded running and reduced empty running. The company has also increased terminal charges. Currently, EXIM and domestic volumes are 80:20. The management expects this to become 60:40 with the increasing domestic volumes. It also plans to manufacture containers domestically to become self-reliant. (2) Reduced LLF: In the past quarter, the management had highlighted an annual LLF of INR 4.5bn. This is now reduced to INR 3.75bn, based on the land rates received from the authorities. CONCOR is also working on an agreement for a one-time payment for 24 government terminals, which will amount for INR 60-70bn. This will be funded through cash reserves of INR 25bn and short-term loans. (3) DFC: DFC operations have begun from the company's Khatuwas terminal. It plans to have ~50 rakes (currently 12) of 25 tons axle by the end of the year. Although there will be no difference in the DFC freight rates, the company's asset utilisation will increase. It will lead to higher profitability, market share gains, higher double-stacked volumes and enhanced turnaround times.

Shares of Container Corporation Of India Ltd. was last trading in BSE at Rs. 691.2 as compared to the previous close of Rs. 644.3. The total number of shares traded during the day was 432548 in over 12532 trades.

The stock hit an intraday high of Rs. 696 and intraday low of 654.4. The net turnover during the day was Rs. 292910970.

Source : Equity Bulls

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