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

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GST implementation to buoy volumes…
The Cabinet recently approved the Constitution Amendment Bill on
Goods and Services Tax (GST), thereby paving way for the bill to be
introduced in Parliament. In a major breakthrough, the Centre was able to
keep petroleum and petroleum products under GST through states will be
allowed to levy tax for the first few years. Subsequently, the entry tax was
subsumed within GST while the Centre agreed to pay GST compensation
for five years. With these contentious issues being ironed out, it is now
anticipated that GST can be rolled out from April 1, 2016. With the
introduction of GST it is expected that the goods movement as well as
volume will increase manifold in the country. Concor with its countrywide
network and footprints at all container ports including private is expected
to be a major beneficiary of the same. Also, in FY15, container volume at
all major ports has grown nearly 8% YoY on a YTD basis. Further, with
the economic scenario expected to improve, Exim container volumes are
anticipated to grow.
Container volume growth at major ports augments Concor revenues
Concor draws ~44% of its volume from JNPT port while Mundra and
Pipavav port contributes nearly 24% & 21%, respectively. As a result,
growth in JNPT port volumes affects Concor’s volume considerably. Over
FY15, the container volumes at JNPT port grew nearly 11%, thereby
aiding Concor’s volume. Going ahead, as the container volume growth
picks up due to GST and improved economic scenario, Concor stands to
gain considerably.
Exhibit 1: JNPT port container volume over the years
JNPT port volume
1083 1085 1037 1101
1073 1065 1015 1132
1015 1095 982 733
1088 1076 1127
4259 4321 4161
2966
500
2500
4500
6500
8500
10500
FY12 FY13 FY14 FY15
000 TEUs
Q1 Q2 Q3 Q4 Total
Source: ICICIdirect.com Research
GST to add fillip to volume: Calls for upgradation
As GST is expected to roll out in FY16, we anticipate total volume CAGR
for Concor at ~11% over FY14-17E, thereby leading to revenue &
earnings CAGR of ~16% each in the same period. Also, PFTs becoming
operational in due course of time are expected to add another revenue
line for Concor. Further, with competitive intensity remaining intact any
near term risk of adverse freight rate movement is expected to be
mitigated by higher volume generation. Finally, as strong balance sheet
and superior cash flow calls for upgradation, we assign P/E multiple of
22x FY17E EPS to arrive at target price of | 1670 and have a BUY
recommendation on the stock.

LINK
http://content.icicidirect.com/mailimages/IDirect_Concor_CoUpdate_Dec14.pdf