Container Corporation of India Ltd (Concor) – Q3FY11 Result Update

Q3FY11 Result Highlights

• Container Corporation of India Ltd (Concor) reported a 9.8% YoY increase in revenues to INR 9,711.3mn in Q3FY11. It was below our expectation of INR 11,498.0mn mainly due to 1.5% YoY decrease in domestic revenues. The domestic handling volume during the quarter decreased by 1.7% YoY to 145,384 TEUs (Twenty Feet Equivalent Units). However, EXIM (export-import) volume increased 14.3% YoY to 517,461 TEUs in Q3FY11.

• Concor registered a 10bps YoY increase in EBITDA margin to 28.9% in Q3FY11. It was above our expectation of 27.5%. The company registered a 70bps YoY increase in net margin to 22.4% in Q3FY11 which was above our estimate of 21.7%. The margins were higher on the back of reduction in expenses related to empty running rakes and various cost rationalisation measures taken by the company during the quarter. In addition, higher contribution from high margin EXIM segment facilitated operating margin to improve.

• In Q3FY11, the market share of the company was 75% in EXIM segment and 78% in domestic segment.

• Concor has acquired 9 rakes (total 233 rakes) during the quarter. The company has ordered additional 50 rakes and expects to get delivery of 25 rakes in FY12 and remaining in FY13. Going forward, EXIM volumes would increase on the back of addition of newly acquired rakes as well as due to the company focus on growing facilities at Mundra port.

Outlook & Valuation:

Since the company faces competition from road transport, the market share of the company is expected to decline to 75% in FY12 in domestic segment. As the company has taken various cost reduction measures and improvement in EXIM volume, operating margin would expand by 30bps YoY to 29.2% in FY12. We believe Concor would post INR 69 and INR 80 EPS for FY11 and FY12 and the stock is currently trading at a PE multiple of 18x and 16x for FY11 and FY12 respectively. We maintain our Hold rating on the stock with a target price of INR 1,300.

To Get more information and to open a demat account click http://www.onlinestocktrading9.in/