Visit http://indiaer.blogspot.com/ for complete details For 2QFY2011, Container Corporation of India (Concor) reported higher-thanexpected
results due to a moderate decline in exim performance. Management
has maintained its 12% annual volume growth guidance in the exim segment for
FY2011E, which we believe would be quite challenging given volume growth in
1HFY2011. Further, hike in haulage charges effective from October 1 has been
put in abeyance for one month. We maintain our Reduce rating on the stock.
Shut down at JNPT and prolonged monsoon drag down performance: Concor
reported 1.6% yoy decline in revenue to `944cr, against our estimate of `891cr.
There was a moderate 5.2% yoy decline in the company’s exim revenue to
`733cr, which came in as a positive surprise as volumes at JNPT were impacted
due to the shutdown of operations for five days in August and prolonged
monsoon. Domestic revenue grew 13.1% yoy to `211cr. We were positively
surprised by higher EBITDA margin, which came in marginally above our estimate
of 27.0% at 27.7%. Margins of the exim business grew by 152bp yoy and
91bp qoq to 28.5%. However, margins of the domestic segment declined by
290bp yoy and 364bp qoq to 9.9% because of lower lead time. Other income fell
by 13.4% yoy to `38cr due to lower yield earned on free cash. Consequently, PAT
grew by 1.2% yoy to `207cr, above our estimate of `186cr.
Outlook and valuation: We estimate Concor to post muted earnings CAGR of
9.9% over FY2010–12E (v/s 17.6% CAGR over FY2005–09). We maintain our
EPS estimate of 66.0 and 72.3 for FY2011E and FY2012E, respectively. At the
CMP, the stock is trading at 17.6x FY2012E earnings, which is at the higher end
of its historical P/E band and at 12.0x FY2012E EV/EBITDA. We maintain Reduce
on Concor with a Target Price of `1,194.
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