Reduce Container Corp; target of Rs 1194: Angel Broking

“For 2QFY2011, Container Corporation of India (Concor) reported higher-thanexpected results due to a moderate decline in exim performance. Management has maintained its 12% annual volume growth guidance in the exim segment for FY2011E, which we believe would be quite challenging given volume growth in 1HFY2011. Further, hike in haulage charges effective from October 1 has been put in abeyance for one month.”

“Concor reported 1.6% yoy decline in revenue to Rs 944 crore, against our estimate of Rs 891 crore. There was a moderate 5.2% yoy decline in the company’s exim revenue to Rs 733 crore, which came in as a positive surprise as volumes at JNPT were impacted due to the shutdown of operations for five days in August and prolonged monsoon. Domestic revenue grew 13.1% yoy to Rs 211 crore. We were positively surprised by higher EBITDA margin, which came in marginally above our estimate of 27.0% at 27.7%. Margins of the exim business grew by 152bp yoy and 91bp qoq to 28.5%. However, margins of the domestic segment declined by 290bp yoy and 364bp qoq to 9.9% because of lower lead time. Other income fell by 13.4% yoy to Rs 38 crore due to lower yield earned on free cash. Consequently, PAT grew by 1.2% yoy to Rs 207 crore, above our estimate of Rs 186 crore.”

“We estimate Concor to post muted earnings CAGR of 9.9% over FY2010–12E (versus 17.6% CAGR over FY2005–09). We maintain our EPS estimate of 66.0 and 72.3 for FY2011E and FY2012E, respectively. At the CMP, the stock is trading at 17.6x FY2012E earnings, which is at the higher end of its historical P/E band and at 12.0x FY2012E EV/EBITDA. We maintain Reduce on Concor with a target price of Rs 1194,” says Angel Broking research report.

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