Container Corporation
BSE SENSEX
28,334
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
8,794
CCRI IN
In-line performance amid weak macro; market share gain is encouraging
195
n
Sequential improvement in operating performance:
3QFY17 EBITDA
258.6 / 3.9
increased 14% QoQ (-7% YoY) to INR2.62b (in-line), led by absence of
1544 / 1055
revision of land license fees pertaining to the previous period. However,
2/-11/-5
margin weakness over last 3-4 quarters was due to lower leads and higher
288
discounting. PAT of INR1.86b was marginally higher than estimate of
43.3
14 February 2017
3QFY17 Results Update | Sector: Logistics
CMP: INR1,278
TP: INR1,309(+2%)
Neutral
Financials & Valuations (INR b)
Y/E Mar
2016 2017E
Net Sales
63.1
59.5
EBITDA
11.6
10.4
PAT
7.8
7.0
EPS (INR)
40.1
36.0
Gr. (%)
-25.8
-10.3
BV/Sh (INR)
409.5
430.9
RoE (%)
10.1
8.6
RoCE (%)
9.7
8.3
P/E (x)
31.8
35.5
P/BV (x)
3.1
3.0
2018E
64.6
12.9
8.9
45.8
27.1
458.1
10.3
9.9
27.9
2.8
Estimate change
TP change
Rating change
INR1.82b due to higher other income and a lower tax rate.
n
Originating volumes grow modestly:
Originating volumes rose 7% YoY, led
by a pick-up in export volumes, as also exhibited by a 13% YoY rise in export
handling volumes for 3QFY17. Total handling volume grew 10% YoY to 783k
TEUs (EXIM at 666k TEUs: +11%YoY; domestic at 116k TEUs: +6% YoY).
n
Realizations continue to slide:
3QFY17 revenue declined 5% YoY (-3% QoQ)
to INR13.3b due to lower realizations, partially offset by higher volumes.
Realizations have been structurally trending lower due to a reduction in lead
distance by ~11% YoY in EXIM movement in 3QFY17. Hence, realizations in
EXIM (per teu) stood at INR15,883 (-16% YoY, -5% QoQ) and in domestic at
INR23,277 (-5% YoY, -2% QoQ).
n
EXIM EBIT (per teu) was INR2,718 (-22% YoY, +4% QoQ), while domestic EBIT
came in at INR27m due to higher empty running expenses. EXIM EBIT
retention/TEU appears to be lower due to higher trans-shipment volumes
and increased discounting. Management expects margin to improve due to
increased proportion of double stacking at Khatuwas terminal.
Valuation and view
n
While CONCOR’s volume recovery has been delayed, its growth story remains
intact. Completion of the dedicated freight corridor (DFC) expected in 2HFY19
will be a significant efficiency/profitability driver for CONCOR. However, long-
gestation MMLP projects are likely to impact the company’s near-term ratios
(RoEs at sub ~10% in FY17/18). A hike in freight rates by railways poses a near-
to medium-term risk.
n
On DFC-based valuation (WACC: 12.3%, TGR: 4.5%), we arrive at a fair value
of INR1,309. The stock trades at 25.5x FY19E EPS of INR50. With near-term
volume concerns, rich valuations and limited upside to our fair value, we
maintain
Neutral.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Abhishek Ghosh
(Abhishek.Ghosh@motilaloswal.com); +91 22 3982 5436
Abhinil Dahiwale
(Abhinil.Dahiwale@motilaloswal.com); +91 22 3980 4309