21 October 2015
2QFY16 Results Update | Sector:
Logistics
Container Corporation
BSE SENSEX
27,288
Bloomberg
Equity Shares (m)
M.Cap. (INR b)/(USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
8,252
CCRI IN
195.0
287.4/4.4
1944 / 1204
1/-7/10
375
38.2
CMP: INR1,470
TP: INR1,700 (+16%)
Buy
Financials & Valuation (INR Billion)
Y/E MAR
Sales
EBITDA
NP
EPS (INR)
2015
61.5
14.0
10.5
54.1
2016E 2017E
60.4
12.6
9.2
47.2
-12.7
418.5
11.8
15.7
31.2
3.5
66.4
15.4
11.4
58.4
23.6
459.3
13.3
17.4
25.2
3.2
EPS Gr. (%) 11.7
BV/Sh(INR) 385.5
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
14.7
18.2
27.3
3.8
Estimate change
TP change
Rating change
EBITDA, volumes in line with estimates, expect better volumes in 2H
Container Corporation (CCRI IN) reported largely in-line EBITDA at INR3.2b (+1%
YoY, +10% QoQ). Despite marginally lower revenue at INR15.0b (est. INR15.4b;
+11% YoY, +6% QoQ), EBITDA was in-line led by improved profitability in both,
EXIM as well as domestic segments.
Adj. PAT stood at INR2.3b (est. INR2.4b; +22% YoY, +13% QoQ), impacted by
higher-than-expected tax rate at 25.8% (est. 23.0%) and lower-than-expected
other income at INR858m (est. INR867m; -7% YoY, +8% QoQ).
Overall volumes stood at 0.75m teu (-6% YoY and +4% QoQ), led by EXIM at 0.6m
teu (-4% YoY, +6% QoQ) and domestic at 0.1m teu (-14% YoY, -3% QoQ). The
domestic decline was mainly due to 26-28% increase in haulage charge. We
model flat YoY volumes in FY16. Management indicated that they will review
their volume growth guidance of ~8% growth at end-3QFY16.
Realization (in INR/teu) in EXIM stood at 19,070 (+19% YoY, +1% QoQ) and
domestic at 25,445 (+16% YoY, +4% QoQ). The YoY increase in realization was led
by higher haulage rates.
EBIT per unit (in INR/teu) in EXIM stood at 3,660 (+38% YoY, +5% QoQ) and
domestic at 489 (-43% YoY, +25% QoQ).
Valuation and view
While DFC (Dedicated Freight Corridor) completion (expected in 2018/2019) will
be a significant efficiency driver for CCRI, its investments in long-gestation
MMLP’s will impact near-term ratios though.
The stock trades at 25.3x FY17E EPS of INR58. While the near term profitability
remains subdued with weak volume growth, expect CCRI to continue to trade at
rich valuations led by long term DFC led upsides in volume (market share gain
from road) and profitability (double stacking and efficiency benefit). We use DCF-
based (WACC 11.9%, TGR 5%) valuation to arrive at a fair value of INR1,700/sh for
CCRI imply 16% upside. Maintain
Buy.
Harshad Borawake
(HarshadBorawake@MotilalOswal.com); +91 22 3982 5432
Rajat Agarwal
(Rajat.Agarwal@MotilalOswal.com); +91 22 3982 5558
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.