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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.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
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.
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