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Container Corp
Export recovery augurs well
Having met with management today at our 15th Annual India Investor
Conference in New Delhi, these are some of our takeaways...
„Double digit traffic growth phase likely from Q4FY11
Concor is seeing stronger traffic growth in its more profitable EXIM segment after
a gap of two years. Recovery in manufacturing export to US and Europe is the
key traffic uptrend. Company expects EXIM traffic growth could exceed 15% in
FY12.
Better revenue mix could help offset rail freight cost hike
Higher growth of the most profitable export segment will help sustain margin
according to management. Rail freight cost though has gone up by more than 8%
so far in FY11, Concor has increased its tariff by about 4% including the discount
being offered since Jan 2011. Despite cost pressures margins are likely to sustain
on lesser empty run and jump in productivity.
Foray into bulk freight & logistics park to drive growth
FY13
Concor has been constrained in terms of new investment opportunity in the past.
However, recent govt policy gives Concor an opportunity to cater to bulk freight as
well as logistics. Concor has plans to set up 8 logistics parks out of which 4 parks
will become operational by end of FY12. Concor has been quite successful in
getting lands of 100-200ha of land per park in 4 places without much of land
acquisition related hassles
Price objective basis & risk
Container Corp (CIDFF)
Our PO of Rs1,212 is based on PE of 16x on FY12E earnings. The stock is
currently trading at around a 20% premium to Sensex. Our PO basis of 16x is
equivalent to a 5% discount to Sensex PE. There has been a strong correlation of
port traffic growth and PE of Concor since the sector was de-regulated in FY06.
We expect the stock to de-rate from a PE of 18xFY12E to 16x along with slowing
traffic growth. At 16x, the stock would trade at a PEG of 1.2x. Risks: Further
deterioration in the global economy impacting traffic and higher competition from
road transport owing to slower than anticipation expansion of railway network.
Upside risks are a sooner-than-anticipated set-up of the logistics park and a
successful foray into the non-container traffic business that occurs before we
anticipate.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Container Corp
Export recovery augurs well
Having met with management today at our 15th Annual India Investor
Conference in New Delhi, these are some of our takeaways...
„Double digit traffic growth phase likely from Q4FY11
Concor is seeing stronger traffic growth in its more profitable EXIM segment after
a gap of two years. Recovery in manufacturing export to US and Europe is the
key traffic uptrend. Company expects EXIM traffic growth could exceed 15% in
FY12.
Better revenue mix could help offset rail freight cost hike
Higher growth of the most profitable export segment will help sustain margin
according to management. Rail freight cost though has gone up by more than 8%
so far in FY11, Concor has increased its tariff by about 4% including the discount
being offered since Jan 2011. Despite cost pressures margins are likely to sustain
on lesser empty run and jump in productivity.
Foray into bulk freight & logistics park to drive growth
FY13
Concor has been constrained in terms of new investment opportunity in the past.
However, recent govt policy gives Concor an opportunity to cater to bulk freight as
well as logistics. Concor has plans to set up 8 logistics parks out of which 4 parks
will become operational by end of FY12. Concor has been quite successful in
getting lands of 100-200ha of land per park in 4 places without much of land
acquisition related hassles
Price objective basis & risk
Container Corp (CIDFF)
Our PO of Rs1,212 is based on PE of 16x on FY12E earnings. The stock is
currently trading at around a 20% premium to Sensex. Our PO basis of 16x is
equivalent to a 5% discount to Sensex PE. There has been a strong correlation of
port traffic growth and PE of Concor since the sector was de-regulated in FY06.
We expect the stock to de-rate from a PE of 18xFY12E to 16x along with slowing
traffic growth. At 16x, the stock would trade at a PEG of 1.2x. Risks: Further
deterioration in the global economy impacting traffic and higher competition from
road transport owing to slower than anticipation expansion of railway network.
Upside risks are a sooner-than-anticipated set-up of the logistics park and a
successful foray into the non-container traffic business that occurs before we
anticipate.
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