Buy Container Corporation; target of Rs 990: Motilal Oswal

Motilal Oswal's research report on Container Corporation

Container Corporation (CCRI) reported volume growth of 6% YoY in 3QFY24. Revenue grew 11% YoY to INR22b (7% below our estimate). Total volumes increased 6% YoY to 1.15m TEUs, with EXIM/Domestic volumes at 0.9m/0.25m TEUs (up 8%/down 1% YoY). Domestic volumes were 24% below our estimate, while EXIM volumes were ~3% below. Blended realization improved ~5% YoY to INR19,161/TEU. EXIM/Domestic realization stood at INR15,915/INR30,966 per TEU (+5%/+8% YoY).  EBITDA margin came in at 23.2% (vs. our estimate of 23.3%). Margin was up 180bp YoY. EBITDA increased 20% YoY to INR5.1b (our estimate of INR5.5b). The land license fee for 3QFY24 stood at INR719m (INR2.9b in 9MFY24). CCRI has reversed INR360m of LLF provisions for the previous years; hence, LLF provisioning is likely to be ~INR4b for FY24. The ongoing reconciliations with Indian Railways and provisioning reversal of previous years may keep LLF in a tight range going forward. In line with the operating performance, PAT grew 13% YoY (7% below our estimate of INR3.6b). For 9MFY24, CCRI reported revenue of INR63.1b (+6% YoY), EBITDA of INR14.4b (+3% YoY), EBITDA margin of 22.8%, and APAT of ~INR 9.4b (+5% YoY). Total volumes handled during 9MFY24 stood at 3.47m TEUs (+7% YoY).

Outlook

We marginally cut our EBITDA for FY24E/25E/26E by ~4%/4%/1%, factoring in lower volume growth on the EXIM front due to geopolitical tensions. Reiterate BUY with a TP of INR990 (based on 20x EV/EBITDA on FY26E).