Buy Container Corporation in the range of | 1670–1705 for a target price of | 2070.00 ;; ICICI Gladiator PICK

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Container Corporation: Volumes pass the tariff test; weakening exports a concern :: Kotak Sec,report

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Volumes pass the tariff test; weakening exports a concern. The December
container rail data for Indian Railways suggests negligible impact on volumes post the
sharp tariff hike (from December 5, 2014). This conforms to our view of remaining
demand for railway container transport being broadly inelastic. Overall volume growth
for 3QFY15 has remained steady at 12% (~8% adjusting for double counting). What
worries us more is the weakening of containerzable exports (flat yoy in 3QFY15).
We retain our estimates for now and `1,330 TP (20X September 2016E EPS).


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Container Corporation of India - ICICI Securities Fundamental Top Picks for 2015

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Buy Container Corporation - GST implementation to buoy volumes…:: ICICI Securities, report link

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Container Corporation: Break-down of cost economics makes recent large hike less relevant :Kotak Sec,link

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Break-down of cost economics makes recent large hike less relevant. The
unprecedented increase in freight costs dents Concor’s chances of gaining market share
from roads—it is fghting capacity constraints and a worsening exim imbalance. With
this hike, Indian railways is likely trying to leverage (1) its limited capacities and
(2) buoyant and inelastic demand, factors that would help Concor to pass on the large
hike (possibly in phases). DFC is the endgame when cost economics would regain
relevance (impact unlikely before FY2019). We revise our target price to `1,330 from
`1,300 based on 20X FY2017E EPS (discounted to September 2016).

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Depreciation mutes quarter!!! • Concor :: ICICI Securities, PDF link

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Buy Container Corp ::Kotak Securities report

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Buy CONTAINER CORPORATION:: Kotak Sec, PDF report link

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CONTAINER CORPORATION OF INDIA (CONCOR)
PRICE: RS.1285 RECOMMENDATION: BUY
TARGET PRICE: RS.1470 FY16E P/E: 19.2X
Realizations continue to remain stable for Concor for both Exim and
domestic segments. Concor is also able to sustain its market share at ~75%
in Exim. The company has reported strong volumes for FY14/Q1FY15 and we
estimate the company to deliver 9% volume CAGR over FY14 to FY16E in
Exim (versus guidance of 10%) and volume CAGR of 8% in the domestic
segment (versus guidance of 15%). We estimate operating margins to
sustain at ~23% and ROE of ~15%. The company recently got the status of
Navratna PSU which we believe also adds value to the company.
We value the company at 22 times FY16E EPS, a premium for its dominant
market share, strong asset base, outperformance and strong balance sheet.
Continue to Recommend BUY with an unchanged TP of Rs 1465.


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Container Corporation -Volume growth disappoints; Profits decline: Karvy

Volume growth disappoints; Profits decline
CCRI’s 3QFY13 standalone Sales, EBITDA & PAT rose +4%, ‐5% & ‐2% YoY
respectively to Rs10.8bn, Rs2.63bn & Rs2.37bn. PAT came in 5% lower than
our estimates driven by ~10% lower than estimated volumes. For the 9MFY13
period, Sales, EBITDA & PAT rose 6%, ‐2% and 10% YoY.
Revenue growth impacted by ~6% YoY lower volumes during the quarter as
logistics demand failed to pick up thereby impacting volume growth to
remain flat QoQ. For the 9M‐FY13 period, volumes declined 2% YoY.
Realisations across both EXIM & domestic segments improved by 2% QoQ
thereby boosting YoY 10% higher blended realizations which helped revenue
growth of 4% YoY.
Sharp rail in haulage charges; cost pass through a positive but volume
growth would suffer: CCRI and other CTOs have indicated that they have
passed on the first round of the 22% haulage hike fully to their customers
and would also try to pass on the second hike of 9% (wef from 1st feb 2013).
This should negatively impact on CCRI’s volume growth for the next three
four quarters on diminishing rail cost advantage vs road.
EBITDA margins should contract ~500bps in subsequent quarters: The
haulage hike impact should result in ~500bps margin contraction subsequent
quarters vs. ~25% witnessed during the preceding few quarters. This should
be primarily driven by ~500bps surge in rail freight charges as % of net sales.
Downgrade to HOLD: Whilst CCRI continue to remain best placed on both
pricing front and balance sheet strength, sluggish economic activities,
diminishing rail vs road container cost advantage would moderate CCRI’s
PAT growths in FY13E & FY14E. We have factored in ‐2% & +5% YoY
volume growth in FY13‐14E. However, in the long term, implementation of
GST and the increased contribution from the logistics parks should drive
CCRI profit growths. We lower our FY13E & FY14E EPS estimates by 5% &
9% respectively to factor in volume disappointment & haulage charge
increase. We also introduce FY15E estimates. Subsequently, we cut our TP to
Rs1,040 (earlier Rs1,110) valuing CCRI at 13.5x its FY14E EPS. In the absence
of near term growth triggers, we downgrade our recommendation to
“HOLD” from “BUY”.

Container Corporation, Results in line: :: Motilal Oswal

 Results in line: CCRI's 3QFY13 results were in line with our expectations,
with EBITDA down 5% YoY at INR2.6b (our estimate: INR2.8b). Revenue grew
3.5% YoY to INR10.8b (our estimate: INR11.7b), while net profit declined
1.8% YoY to INR2.4b (our estimate: INR2.3b).
 Volumes remain under pressure: Volumes in TEU terms remained under
pressure. EXIM volumes declined 5.8% YoY to 0.52m TEU while domestic
volumes declined ~5.2% YoY to 0.1m TEU. Overall volumes declined 5.7% to
0.64m TEU. While volumes declined in TEU terms, in tonnage terms, YTD
volumes grew ~7.5% YoY, implying higher share of bulk goods in the cargo.
 EBITDA margin under pressure: EBITDA margin was 24.3%, down 219bp YoY
and 11bp QoQ. Margins were negatively impacted on account of higher
empties cost (up 20% YoY at INR570m) and CCRI's inability to pass on the
entire haulage charge increase (70% passed on) by Indian Railways. CCRI has
managed to successfully pass on ~70% of the price hike (~12.5% fare hike v/
s cost hike of 18%); it is hopeful of passing on the remaining cost hike in a
phased manner over the next few quarters.
 Valuation and view: We are revising our revenue estimates by -3.9%/-7.8%/
-7.6% for FY13/FY14/FY15 and net profit estimates by 0.2/-6%/-5% for FY13/
FY14/FY15. CCRI trades at 12.6x/11.4x FY14E/FY15E earnings. We maintain Buy
with a revised DCF-based target price of INR1,322 (upside of 42%).

Container Corporation of India (CONCOR) Buy Target : | 994 ::ICICI Securities, PDF link

BHEL, Power Finance Corp, Rural Electrification, Container Corporation, reports by Kotak Sec PDF links

CONTAINER CORPORATION OF INDIA report by Kotak Sec PDF link

Container Corp of India: Trade imbalance leads to decline in Exim: Centrum

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Trade imbalance leads to decline in Exim profitability
Container Corporation of India’s (Concor) Q3FY12 result was marginally better
than our expectations with standalone net profit at Rs2,414mn vs. our estimate of
Rs2,306mn (variance of 4.6%). Operating profit at Rs2,774mn (down 1.1% YoY),
and operating margin at 26.5% were in-line with our estimates at Rs2,713mn and
26.8% respectively. The domestic segment continued to underperform with
volumes declining 17.4% YoY and EBIT plunging 10.3% YoY to Rs215mn in Q3. For
the 9mFY12 domestic volumes fell by 15% led by IR policy related changes. The
Exim segment’ EBIT declined 3.1% to Rs2,273mn despite volumes increasing 7.3%
YoY mainly led by an increase in empty running costs. We have marginally
tweaked our estimate to factor in slower domestic volume growth, higher other
income and provision tax. We maintain Hold rating and target price of Rs1,015.
􀂁 Operational performance in-line with expectations: Concor’s Q3 standalone
revenue increased 7.7% YoY to Rs10,462mn, 3.4% above our estimate. Operating
profit at Rs2,774mn (down 1.1% YoY) was 2.3% above estimate, while operating
margin at 26.5% was just 28bp higher than expectations.
􀂁 Volume growth continued to remain slower: While Exim volumes grew 7.3%
YoY to 555,399 containers, the domestic segment continued with its poor
performance with volumes declining 17.4% YoY to 120,108 containers.

Container Corporation :PAT disappoints on continued weakness in domestic volumes ::JP Morgan

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 Concor reported 2Q PAT of Rs.2.2B (+7.5% yoy), which was lower than
estimates. Operating performance continued to disappoint as volumes grew only
+5% yoy (as domestic volumes declined -15%y/y, EXIM volumes though grew
10% yoy). EBITDA margins at 26.6% declined -100bp yoy due to higher other
expenses (on account of increased CSR expense). The company charged a prior
period expense of Rs.468m on account of tax expenses in 2Q. After adjusting for
the same, the PAT came in at Rs.1.75B.
 Conference call takeaways: Volumes: 2Q domestic volumes (-15% yoy)
continued to decline post the steep hike in railway fares earlier in the year.
Management has highlighted that negotiations are on with the railways to roll
back these hikes. EXIM volumes growth was driven by a pick up in JNPT
volumes as well as increased volume traffic in Southern India (However, these
are essentially short lead distances). Realisations: Domestic realisations
improved yoy due to partial pass-on of Railway freight rate hikes taken in
3QFY11. Additionally, Railways have increased surcharge from 2% to 5%
during this quarter. Non railways related revenues remained at c25% during the
quarter; management is targeting to grow the share of other revenue to c.30% of
sales in the medium term (driven by logistic parks) Margins: 2Q margins were
down 110bps y/y driven by higher employee expenses and charges from CSR
(corporate social responsibility) related expenses (Rs29Mn). The company will
have to provide for 0.5% of its overall profits for CSR contribution, as mandated
by government. Tax Rates: Management expects tax rate to be at MAT rates for
the year. Capex: Company plans to incur capex of c6Bn in FY12. Other updates:
Management also reported that their Khodiar logistics park has become
operational. However, meaningful profits will come only over next 3-4 years.
 Estimates and TP: We are lowering our FY12 and FY13 by 7% to factor in the
weaker volume sales. We set a revised Mar’12 DCF based target price of Rs.1048
and re-iterate our Neutral rating given that while Concor will benefit from growth
in EXIM segment, the policy environment remains uncertain on the domestic
segment. Risks: on the upside – higher than expected operating margins and
railways rolling back domestic freight rates. On the downside: growth rates may
be impacted in case of a moderation in global economy.

Reduce: CONTAINER CORPORATION OF INDIA (CONCOR):: Target Rs 950: Kotak Sec,

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CONTAINER CORPORATION OF INDIA (CONCOR)
PRICE: RS.975 RECOMMENDATION: REDUCE
TARGET PRICE: RS.950 FY13E P/E: 13.9X
Subdued operational performance
Concor reported its Q2FY12 net profit at Rs 1,754 million (-15 % YoY and -
25% QoQ) ~ 16% lower than what we had estimated. This was on account
of lower realizations in the Exim segment of Rs 14,722 per TEU (versus Rs
14,864 per TEU YoY). This is primarily due to falling lead distance with some
originating volumes shifting from JNPT to Pipavav and Mundra for the
company. However realization have increased in the domestic segment, as it
has passed a significant portion (not entirely) of the rail haulage hike by
Indian Railways (IR) to the customers. Consequently the operating margins
of the company came in at 26.4 % falling by 100 bps YoY. Revenues were
reported at Rs 9.9 bn growing 5% YoY primarily aided by growth in
volumes in the Exim segment (+10% YoY and 6% QoQ) and higher YoY
realization (+8 % YoY and 7% QoQ) in the domestic segment. Falling lead
distance, higher domestic haulage (margin pressure), competition and
infrastructure bottlenecks of IR are jeopardizing the growth prospects of
Concor. We change our rating to REDUCE from Accumulate with a price
Target of Rs 950.
Highlights of the quarter
n Revenues in the Exim segment was reported at Rs 7,999 (+9% YoY and +4%
QoQ). Revenues in the domestic segment was reported at Rs 1,946 mn (-8%
YoY and +8% QoQ). Overall revenues was reported at Rs 9,945 mn (+5% YoY
and +5% QoQ).
n Operating margins for the quarter has slipped by 100 bps to 26.4 % primarily
due to higher rail freight expense. Management indicated that the Corporate
Social Responsibility (CSR) expense was also up in the quarter.
n With interest rates moving up by more than 200 bps in the last one year and
Concor having a cash reserve of Rs 23 bn , the other income component of the
company has gone up to Rs 753 mn ( from Rs 381 mn YoY)
n There is a prior period adjustment made in Q2FY12 of Rs 468 mn which pertains
to income tax adjustment of FY11. Company would continue to be a MAT paying
entity going ahead with effective tax rate at 20%.
n Consequently the PAT of the company has slipped to Rs 1754 mn (-25% QoQ
and -15% YoY).

Container Corporation of India (CCRI.BO, Sell) Growth and returns declining –Goldman Sachs,

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Container Corporation of India (CCRI.BO, Sell)
Growth and returns declining – valuations still not attractive; maintain Sell
 We reiterate our Sell rating on Container Corporation (Concor) due to:
(1) The domestic segment becoming increasingly unattractive due to slower growth and shorter lead
distances.
(2) Intense competition in the Exports-Imports (EXIM) segment, leading to pressure on Concor’s market share
as well as lower price realizations.
(3) Declining margins: We forecast 140bp decline in EBIT margins over FY11-FY12 as we believe it will be
difficult for the company to fully pass on increases in haulage charges and rising fuel costs to customers.
(4) Unattractive valuations: Current 12-month forward P/E is near its 7-year mean, despite FY12E EPS growth
of 6% – lower than FY04-FY11 EPS CAGR of 12%.
 We do not make any changes to our estimates on Concor – our current forecasts are already 5%-6% below
Bloomberg consensus expectations for FY12 and FY13.
Valuation
 Concor currently trades at a 12-month forward P/E of 16.5X – a 13% discount to its 5-year average 12-month
forward P/E of 19X. Concor’s current valuation adequately balances the company’s strong execution track
record for the company with the near-term risks from order inflow delays, in our view.
 We lower our 12-month target price to Rs1,012 (from Rs1,030) based on 14X average FY12E-FY13E EPS (vs.
15X earlier), which is in line with the 5-year median 12-month forward P/E for the company, and our
expectations for a slower growth outlook in the future.
 Although the stock has declined 16% since we added it to our Sell list, and our revised target price now
implies 10% upside potential, Concor still offers one of the lowest upsides in our coverage group and hence
we maintain our Sell rating on the stock.
Key upside risks
 (1) Policy changes to increase the attractiveness of rail freight vs. road freight, and (2) sudden pick-up in
industrial production growth and manufacturing.

Read about other companies in sector recommended by Goldman Sachs and top picks in link below:

Goldman Sachs:: Slowdown in capex continues: Sector at trough valuations

Accumulate CONTAINER CORPORATION OF INDIA; Target Rs1,000:: Kotak Sec,

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CONTAINER CORPORATION OF INDIA (CONCOR)
PRICE: RS.930 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.1000 FY12E P/E: 13.7X; P/ABV: 2.1X
Stock has corrected significantly - change rating to Accumulate
from Reduce
Stock has underperformed the broader market in the last one
year
Since we had initiated coverage on Concor exactly a month back with a Reduce
rating and TP of Rs 1000 (CMP was Rs 1098 on 29th July 2011) the stock has fallen
17 % surpassing our target price. In fact it has underperformed the broader market
in the last one year by falling 29% versus 15% fall in nifty. Now the stock trades at
2.1 x FY12E P/B, reasonable considering ~16% RoE. Three year average historical
one year forward P/B for Concor is 2.5. In case of P/E multiple, it trades at 13.7
times FY12E, which we believe is little undervalued in context of the healthy operating
margin of above 25% with strong operational cash flows of ~ Rs 24 bn over
FY11 to FY13E and healthy free cash flow of ~Rs14 bn over FY11 TO FY13E. Average
historical one year forward P/E for Concor for the last 3 years is 16.
Concor has a mammoth infrastructure
Concor had acquired most if its land around 22 years back on long term lease from
Indian Railways (IR) and the network of ICD and CFS on these pan India pieces of
land were built in a phased manner. These terminals are located strategically along
the key container-transporting corridors in the country. Today private operators have
mostly acquired private land at market rates to set up their own inland container
depots (ICDs). Even the 10,000 odd wagons which Concor owns were acquired long
time back and have depreciated a lot. Consequently the cost of service of Concor is
comparatively low than the private players.
Pan India infrastructure for Concor
Nos
No of rakes 220
No of wagons 10,000
No of ICDs 60
Source: Company
Even the employee cost (even after the sixth pay commission) has been only around
2% of its revenues compared to 5% for private players like Gateway Distriparks Limited
(GDL).The above factors coupled with competitive pricing enables Concor to
enjoy ROE of ~ 20%, one of the factors that lured most of the private players to
enter the container rail business.
Operational performance and cash flow generation continuous to
be healthy
Even though operational performance of Concor is not at historical high (ROE has
fallen from 25% in FY07 to around ~16% in FY11), still it has one of the highest
operating margins of 25% (Vs. 17% of GDL). Also we estimate strong operational
cash flows of ~ Rs 24 bn over FY11 to FY13E and healthy free cash flow of ~Rs14 bn
over FY11 TO FY13E. The key reason for fall in ROE for the company is the fall in
asset turnover - the asset turnover for Concor has fallen from 0.97 in FY08 to 0.72 in
FY11. Similarly asset turnover has impacted the ROCE of the company. This is primarily
due to competition where the asset + additional capex are not translating into
revenue and profitability as it did historically for Concor.


Competition continuous to intensify - Private container rail business
growing steadily
Private operators are getting tie-ups (as Concor do) with shipping lines to drive their
Exim volumes. Most private players have also accelerated their ICD expansion and
rolling stock addition programme to get a share in the Exim business. For instance,
GDL which currently operates 21 rakes would be adding further 8 rakes in the next
two years. Also their Faridabad ICD is expected to become operational by
Q3FY12.While Concor relatively is going slow with their capacity expansion
programme.


We estimate that Concor which has already lost 20% Exim business to private operators
would lose further market share to private operators like In logistics Solutions,
Boxtrans Logistics, Gateway Distriparks and Arshiya International.


Railway policy change has hampered domestic volumes in
Q1FY12 - domestic volumes to slow down for the company
Concor reported a 13% YoY decline in domestic volumes in Q1FY12 primarily led by
recent railway policy effective Dec-2010. Railways increased the specified rating of
five commodities (cement, stone other than marbles, iron & steel, alloys & metals,
POL products) leading to higher haulage by 100% to 275%. This led to Concor losing
almost the entire volumes of these commodities to road transportation. In fact,
up until Nov-2010 domestic volumes had witnessed an 8% YoY growth, which were
almost completely nullified by the loss of these volumes (reported 9MFY11 domestic
volume growth of about 5%). For full FY11, Concor reported a domestic volume
growth of about 0.9% YoY. This step of railways is likely to impact YoY growth figures
in FY12E as well, since first eight months of FY11 were not impacted by the
policy change. We estimate the domestic volumes to grow at a slow pace of 6% in
FY12E (against historical 8%).
Note: India Railway (IR) is reviewing the domestic rail policy of December 2010
which dented the domestic volumes for Concor in the last two quarters. This policy
may be reversed by IR with some conditions. If such a reversal happens, we would
increase our domestic volume assumption and upgrade earnings and TP.


Railway policy change has hampered domestic volumes in
Q1FY12 - domestic volumes to slow down for the company
Concor reported a 13% YoY decline in domestic volumes in Q1FY12 primarily led by
recent railway policy effective Dec-2010. Railways increased the specified rating of
five commodities (cement, stone other than marbles, iron & steel, alloys & metals,
POL products) leading to higher haulage by 100% to 275%. This led to Concor losing
almost the entire volumes of these commodities to road transportation. In fact,
up until Nov-2010 domestic volumes had witnessed an 8% YoY growth, which were
almost completely nullified by the loss of these volumes (reported 9MFY11 domestic
volume growth of about 5%). For full FY11, Concor reported a domestic volume
growth of about 0.9% YoY. This step of railways is likely to impact YoY growth figures
in FY12E as well, since first eight months of FY11 were not impacted by the
policy change. We estimate the domestic volumes to grow at a slow pace of 6% in
FY12E (against historical 8%).
Note: India Railway (IR) is reviewing the domestic rail policy of December 2010
which dented the domestic volumes for Concor in the last two quarters. This policy
may be reversed by IR with some conditions. If such a reversal happens, we would
increase our domestic volume assumption and upgrade earnings and TP.


Liquidity in the stock is a concern
Concor is a Government Enterprise with Government of India holding 63.08% and
Institutions including foreign institutions holding around 33.72% in the company. Out
of the total number of shares of 130 mn, only around 3.2 % (or 4 mn shares) is
available as free float. This is the only reason for low volumes in the stock at the
bourses. Similar is the case even in Allcargo Global Logistics


Outlook and Valuation
We are not changing the estimates as nothing has fundamentally changed in the
company/sector. We continue to value Concor at 15x FY12E P/E. Our value reflects
the following: 1) Overall volume CAGR of ~5.6 % over FY11 to FY13E primarily led
by Exim volume CAGR of 5.5 % and domestic volume CAGR of 6% YoY.2) Sustained
operating margins of above 25% both in FY12E and FY13E. 3) Operational
cash flows of ~ Rs 24 bn over FY11 to FY13E and healthy free cash flow of ~Rs14 bn
over FY11 to FY13E.With the above projections, we believe the valuations have become
little attractive and that has lead to the change in the rating. We now have an
ACCUMULATE rating on the stock with an unchanged target price of Rs 1000.

Container Corporation: Upgrade on attractive valuations as headwinds seem priced-in::Kotak Sec,

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Container Corporation
Infrastructure
Upgrade on attractive valuations as headwinds seem priced-in. Upgrade on (1)
recent underperformance, (2) attractive valuation (2.1 P/B with 18% RoE and 29%
adjusted for cash) and 12.6 P/E on reasonable estimates, (3) strong B/S and cash flows,
(4) exim growth on buoyant trade data so far, resolution of one-off 1Q issues and (5)
potential upside from lower tax and domestic tariff review. Global trade weakness and
sharper-than-expected market share loss to competition are key risks. TP Rs1,150
(Rs1,275 earlier).


Upgrade on recent correction as stock seems reasonable on P/E and P/B relative to cash and RoE
Concor has underperformed 8% over the last month and now trades at 2.1 FY12E P/B, reasonable
in context of 18% RoE (29% adjusted for cash). Concor has bottomed at 2.0 P/B in earlier instance
as well. P/E of 12X FY2013E is reasonable in context of (1) strong operational cash flows before
capex and (2) average historical P/E of 16.3 and 14% premium over Sensex versus parity currently.
Exim growth remains buoyant though opportunity set, competition and exim imbalance limit gains
Exim traffic has shown traction in the past few quarters (exports grew 45.7%, imports 36.2% in
1QFY12). Concor stands to benefit though gains get constrained due to (1) its limited opportunity
set (containerized goods through rail), (2) competition within rail and (3) loss of business to road
operators (exim imbalance led de-stuffing). Concor continues to lose market share over the past 5
years (22% in FY2011 versus 31% in FY2006) as its exim volumes grow (17%) slower than market
(49%) over FY2007-11. We build in 7% exim volume growth for Concor (with about 10-12%
sectoral growth) versus 2.5% in 1Q as equipment issues at JNPT resolve. Concor may gain market
share at ports like Mundra (FY2011 - gained market in Mundra assuming constant rail:road mix)
and benefit from volumes growth at Pipavav etc. (seemingly almost 100% market share).
Policy change-led drop in domestic volumes to last two more quarters; partial resolution possible
Concor has taken the brunt of change in domestic freight policy nullifying incentive to transport
some bulk goods in containerized form. For Jan-June 2011 (post policy change in Dec 2010), its
domestic volumes have fallen by 11% and per TEU margin has declined 18% yoy. The company is
pursuing to get partial relief from this policy change for genuine bulk traffic that can be carried in
containers. We build 5% yoy drop in domestic volumes for FY2012E and 7% growth thereafter.
Revise estimates to factor in lower business growth; upgrade to ADD on attractive valuations
We revise our estimates to Rs70, Rs78 from Rs72.3, Rs82.4 for FY2012E, 2013E, respectively to
factor in lower growth in domestic and exim volumes. We upgrade stock to ADD (TP of Rs1,150 at
14X FY2013E plus Rs50 investments from Rs1,275 at 15X earlier) on (1) favorable risk reward
tradeoff, (2) rub-off from exim growth and (3) possible domestic regulatory review.

Container Corporation - 1QFY12 PAT growth aided by lower tax rates; operating metrics disappoint; management lowers volume guidance :JPMorgan

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Container Corporation of India Ltd Neutral
CCRI.BO, CCRI IN
1QFY12 PAT growth aided by lower tax rates; operating metrics disappoint; management lowers volume guidance


 Concor reported 1Q PAT of Rs.2.3B (+21% yoy), which was ahead of
our estimate. However, this was driven by a lower tax rate (-600 bps yoy)
and higher other income (+64% yoy). The operating performance
continued to disappoint as volume growth remains anemic (-0.7% yoy) on
falling domestic segment sales (-13% yoy) and sedate growth in the EXIM
segment (+2.5% yoy). Management has lowered its volume guidance to
9% for the EXIM segment in FY12E.
 Conference call takeaways: Volume outlook: While industry EXIM
traffic grew by 8% in 1Q, Concor underperformed (+2.5% yoy) as traffic at
JNPT continued to be impacted by capacity bottlenecks. Consequently, the
share of JNPT has reduced to 60% for Concor (vs. 74% last year) while that
of Mundra and Pipavav ports has risen to 11% and 14%, respectively. Lead
distances have reduced further to 1,080 km. The domestic traffic continued
to decline due to the adverse impact of the freight rate hikes by Railways in
3QFY11. Realisations: Average realisations improved by 4% yoy due to
strong growth in related services i.e., warehousing, etc. The share of non
railways-related revenues increased to c.25% this quarter (up from 21%
earlier). Margins: EBITDA Margins expanded +40bp yoy aided by a higher
share of EXIM traffic as well as better cost management (aided by
substituting leased equipment with company owned). Other income (+64%
yoy) was driven by higher interest income and increased dividend payout
from its JVs. Capex: Company plans to incur a capex of 7bn in FY12.
 Maintain estimates and PT: We are maintaining our FY12 and FY13
estimates and PT. We reiterate our Neutral rating, given our view that while
Concor will benefit from growth in the EXIM segment, the policy
environment remains uncertain; further, the stock price at current levels is
adequately factoring in the growth ahead. Risks: on the upside – higherthan-
expected operating margins and railways taking back the revised
freight rates. On the downside: growth rates may be impacted in case of a
moderation in global economy; any further policy change may impact
business prospects