Add Container Corporation of India Ltd For Target Rs. 669 - Yes Securities
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Result Highlights
* Container Corporation (Concor) reported topline growth of ~24% yoy (to Rs.19.3 bn) led by ~13% volume growth and 11% growth in realization. Domestic revenues witnessed strong growth (+30% yoy; contribution: 29%) as compared to the EXIM revenues (+22% yoy).
* CONCOR reported volumes of 1.05 mn TEUs in Q4 FY21 of which 0.85 mn TEUs were of EXIM and balance Domestic. Overall volumes grew by 13% yoy led by 11% yoy growth in EXIM and 21% yoy growth in Domestic volumes. The volume mix of EXIM: Domestic stood at 81:19% vs 83:17% yoy. FY21 volumes declined by 3% yoy driven by 4% fall in EXIM volumes offset by 2% growth in domestic volumes. FY21 volume mix of EXIM: Domestic stood at 83:17% vs 84:16% yoy.
* Land License Fee Issue: During FY21, the company has provided ~Rs5.2 bn towards LLF for all terminals on Railway Land. The dispute with the Railways Ministry about the calculation of LLF has been cleared and it would be booked by the Company as per the number it had earlier provisioned (6% of the market value of land). This clears the major uncertainty related to LLF and process for divestment can be smoother.
* Operating performance was hit due to certain one offs related to employee costs and other expenses. The margins are expected to stabilize in coming quarters.
Our view:
The resolution of the LLF issue provides comfort and clears the path for disinvestment. The Company is now looking to enter into long term lease agreements with Railways and buy new terminals which would save on costs. While Q4 has been impacted by several one‐time costs, the margins are expected to improve from FY22 onwards.
As DFC becomes operational, the volumes should pick up from FY23 onwards. While we have lowered our estimates for FY22, to factor in the weak economic activity during Q1, we expect FY23/24 to be strong on the base of increase in volumes and some benefits of DFC coming through. We have rolled forward our estimates to FY24 and retain our ADD rating on the stock for target of Rs669/share (24x FY24 EPS).
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