Buy Container Corporation; target of Rs 1600: ICICI Direct

We recently met the management of Container Corporation of India (Concor), a market leader with 73% market share in total container traffic carried by Indian Railways (IR). Concor was incorporated in March 1988, by taking over seven inland container depots (ICDs) from IR. As on FY16, it has the largest network of 64 terminals (13 - Exim, 16 - domestic & 34 - combined). In addition to the same, Concor is on track to set up private freight terminals and multi modal logistics parks (MMLPs) across 15 locations in India with plans to add another five over the next couple of years. Execution of the same would position it as a multimodal transport and logistics operator for domestic and international containerised cargo.

Concor’s recently started Khatuwas ICD is strategically located to cater to west coast ports, including Jawaharlal Nehru Port Trust (JNPT), Pipavav, Mundra and Hazira. Consequently, the management expects a lot of local cargo from adjoining manufacturing hubs, earlier carried by road or other rail operators to shift to the ICD. With a threefold increase in capex to Rs 8600 crore in FY16 from Rs 2800 crore in FY15, the work at the DFC has accelerated. Speedy construction of DFC structurally augurs well for Concor’s future earnings. Given these multiple triggers, we continue to value Concor at a P/E of 25x FY18E earnings of Rs 64. We maintain BUY recommendation with a target price of Rs 1600.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.