Sector Update | 19 March 2017
EXIM rail container volumes maintain their healthy uptrend
Robust tonnage growth may ease margins pressure for CCRI
EXIM originating container rail volumes maintained the double-digit growth trend of
the last seven months. Originating container rail volumes in tonnage terms increased
21% YoY over Jan-Feb 2018.
In our view, with ~73% market share in container rail movement, Container
Corporation of India (CCRI) is likely to track growth rates of the underlying market.
We, however, note that, in Feb-18, lead distance for EXIM declined by ~30km MoM
and by ~46km from 4QFY17 levels. This, in our view, should have repercussions on
This apart, price hikes on key routes in 4QFY18 could impact margins. Healthy volume
growth, though, could partly offset the impact.
Domestic originating container rail volumes in tonnage terms declined by 1% YoY over
Jan-Feb-2018. We had assumed 10% YoY growth for CCRI for 4QFY18. Thus, the decline
in domestic volumes could impact our estimates for CCRI, but the extent of revision
may be limited as domestic is not a major segment for CCRI.
EXIM container rail data suggest strong growth over Jan-Feb 2018
EXIM originating container rail volumes in tonnage terms grew by a robust 21%
YoY over Jan-Feb 2018. Notably, growth has consistently been in double-digits
for seven months now, translating into 15% YoY growth in container rail
volumes for 2QFY18/3QFY18. With ~73% market share in container rail
movement, CCRI reported EXIM originating volume growth of 8% YoY (TEU
terms) for 2QFY18/3QFY18.
Lead distance reduction hurting realizations
Lead distance for the rail segment has been declining consistently due to the
increasing proportion of volumes from Mundra/Pipavav ports (which have a
lesser lead distance to the north hinterland). This, in turn, has been adversely
affecting realizations, and thus, margins. Lead distance for EXIM rail
transportation declined by 30km MoM in February, which may impact margins
We also note that, for CCRI, the lead distance in the EXIM segment had declined
by ~70km YoY in 3QFY18 (according to management, a 70km decline in the lead
distance corresponds to ~INR800/TEU decline in realizations). The impact,
though, was partly offset by price hikes by CCRI in 2QFY18/3QFY18. A higher
proportion of double-stacking volumes in 3QFY18 also helped improve margins.
Volume growth to offset realization miss
CCRI may see some impact of a reduction in EXIM rail lead distance in Feb-18,
particularly in the absence of meaningful price hikes in key routes. We have
assumed QoQ margin improvement of INR51/TEU for CCRI’s EXIM segment.
However, we see upside risk to our volumes estimate from better-than-
estimated volume growth.
8 August 2016
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Investors are advised to refer through important disclosures made at the last page of the Research Report.
– Research analyst
(Abhishek.Ghosh@MotilalOswal.com); +91 22 3982 5436
– Research analyst
(Pradnya.Ganar@motilaloswal.com); +91 22 3980 4322