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Container Corporation of India (CCRI) reported healthy revenue in 2Q driven by strong volumes both on domestic (10% YoY) and EXIM (18% YoY). Apart from rail transportation service, CCRI continues to explore business opportunities in areas like first mile, last mile service and distribution logistics which has resulted into domestic growth. With clarity received from the govt for LFF provision (6% of the market value of the land), company has estimated Rs4.5bn expense for FY23E. Management has maintained its guidance for revenue/ PAT growth of 10-12% for FY23E on the back of strong volume growth across both the segments, healthy market share gains and pickup in global and domestic trade.

We are positive on CCRI’s prospects and believe that it is best positioned to capitalize on favorable infrastructure?related tailwinds. We remain positive on the structural growth story considering 1) continual market share gains in domestic segment 2) strong EXIM volumes, and 3) new strategic initiatives. We have introduced our FY25E estimates with revenue / PAT growth of 13% / 13% YoY owing to healthy volumes. At CMP, the stock trades at a P/E of 32.5x/27.5x FY23E/FY24E earnings and at an EV of 19.9x/17.1x FY23E/FY24E EBITDA. We have an ADD rating with a TP of Rs850 valuing the company at a PE multiple of 27x of FY25E EPS which is implying an upside of 11%.

Result Highlights

? For Q2FY23, CCRI’s revenues grew 8% YoY to Rs19.7bn (below Ysec / consensus estimate of Rs20.8bn / 21.0bn), driven by growth in blended realizations to Rs17,228/TEUs (down 7.4% yoy).

? CCRI recorded volume growth of 16.6% YoY to 11,43,895 TEUs in Q2FY23, primarily due to steady jump in EXIM volumes of 18.2% to 936,950. Domestic volumes stood at 206,945 TEUs (up 9.9% YoY).

? EBITDA grew 16.9% YoY to ~Rs5bn (Ysec estimate of ~Rs5.2bn) with EBITDAM witnessing expansion of 192bps YoY to 25.3% (in-line with Ysec estimate of 25.3%). Margins improved on account of lower rail freight expense.

? Consequently, Adj PAT grew 14.6% YoY to Rs3bn (below Ysec estimate of Rs4.7bn) on account of lower than expected other income.

? At the CMP, the stock trades at a P/E of 32.5x and 27.5x its FY23E & FY24E earnings.

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