Buy Container Corp; target of Rs 1250: Motilal Oswal

Motilal Oswal is bullish on Container Corporation of India and has recommended buy rating on the stock with a target of Rs 1250 in its October 15, 2012 research report.

“By virtue of its legacy low cost pan India strategic assets, Container Corporation of India (CCRI) enjoys an inimitable resource advantage over its peers, which is steadily increasing with time. None of the 15-odd new players that have entered since the container train operation (CTO) industry was opened in FY06 have even achieved minimum economies of scale. CCRI is implementing preemptive capex of INR62b, which will not only further enhance its competitive advantage, but also allow it to position itself as a total logistics player.”

“CCRI is one of the best proxies to play multiple themes such as (1) infrastructure thrust, especially investments aimed at correcting the freight transport modal mix, (2) reforms – GST, FDI in Retail, and (3) ongoing structural trends – containerization, shift from road to rail. Successful execution of proposed infrastructure capex and key reforms could result in container rail traffic growing at 17.6% over FY13-18. As the undisputed leader, CCRI should benefit the most. We expect CCRI’s volumes to grow at a CAGR of 17.1% over FY13-18. CCRI’s key strength is its ability to provide single window facility for multimodal logistics services. It is able to do so through its strategic JVs with its customers (GDL/Allcargo), port operators (APM/ DPI), road haulers (TCI), air cargo (HALCON/ GVK) and shipping lines (Maersk).”

“We believe CCRI’s inimitable pan India network provides it with a significant moat, which coupled with positive long-term industry prospects, will allow it to enjoy a prolonged period of growth. We believe DCF is the best way to capture the intrinsic value of CCRI, given its stable cash flow, consistent payout ratio, robust operational RoCE and low reinvestment requirements. Initiate coverage with a Buy rating and a target price of INR 1250 (upside of 19.3%),” says Motilal Oswal research report.

FIIs holding more than 30% in Indian cos

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