Container Corporation,Broadly in-line results.:: Kotak Sec,

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Broadly in-line results. Concor reported revenues of Rs9.4 bn, down 1.6% yoy and
3.8% below estimate. Low rail freight expenses led the 130 bps yoy margin expansion;
in line with estimates. Exim segment led the revenue disappointment (5.7% below
estimates) likely led by lower-than-expected volume growth and shorted lead distances.
Domestic segment reported a revenue growth of 13% yoy while the exim segment led
the margin expansion. PAT at Rs2.06 bn was marginally below estimates of Rs2.1 bn.


Results broadly in line with estimates; revenues decline on a yoy basis
􀁠 Revenue records de-growth: Concor reported 2QFY11 revenues of Rs9.4 bn, down 1.6% on
a yoy basis and marginally below our estimate (by 3.8%) of Rs9.8 bn (see Exhibit 1). We had
expected the company to report a marginal revenue growth of about 2-3%. The slight revenue
disappointment is likely to have been led by a slower-than-expected pick-up in exim volumes.
􀁠 EBITDA margin expansion—in line with estimates: Concor reported a 130 bps yoy
expansion in EBITDA margin to 27.7%, in line with estimates. The margin expansion
was led by lower rail freight expenses as a percentage of sales (down 150 bps yoy to
56.7%). The revenue miss led to a net PAT of Rs2.06 bn in 2QFY11, marginally (2%)
below our estimate of Rs2.1 bn.
􀁠 Half-year performance: For the half year ending September 30, 2010, Concor reported flat
revenues on a yoy basis of Rs18.6 bn. EBITDA margin expanded by about 50 bps yoy to 27.4%
in 1HFY11 from 26.8% in 1HFY10, while net PAT remained relatively flat at Rs4 bn.
Domestic segment leads revenue growth while exim segment leads margin expansion
Exim revenues of Rs7.3 bn were about 5.7% below our estimate while domestic revenues of Rs2.1
bn (up 13% yoy) was 3.5% above our estimate (see Exhibit 2). Our estimates were based on 7-9%
yoy growth in volumes and flat realizations on a sequential basis. Apart from lower-than-expected
volumes the exim revenues could also have been impacted by lower average lead distances in
2QFY11 versus 2QFY10. Note that this trend was seen in 1QFY11 as well. The margin expansion
was, however, led by the exim segment which recorded a 150 bps expansion in EBIT margins,
while the domestic segment recorded a 290 bps yoy decline in EBIT margins.
Reiterate REDUCE with a TP of Rs1,300; will revisit estimates post today’s conference call
We retain our estimates of Rs73.1 and Rs84.6 for FY2011E and FY2012E, respectively (see Exhibit
4). We reiterate our REDUCE rating with a target price of Rs1,300/share based on relatively
expensive valuations and increasing competition likely to partake market share.