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Container Corporation’s (Concor) 3QFY23 revenue grew 4% YoY (+9% 3-year CAGR) to INR 19.9bn (9% below JMFe). Domestic volume (originating basis) sustained its momentum, growing by 13% YoY while realisation grew by 8% YoY. However, EXIM volume (originating basis) fell by 15% YoY on weak global cues and market share loss in the key ports of Mundra and Pipavav on account of increased competitive intensity. To offset this, CCRI has introduced a new import scheme that offers free empty movement on incremental volumes. Moreover, on the domestic side, CCRI is focused on providing an end-to-end offering (including first-mile/last-mile services) that will help increase customer stickiness and volume. Land Licence Fee (LLF) of INR 970mn was steady QoQ (-12% YoY); however the management has retained its FY23 guidance of INR 4.5bn (adjustments in 4QFY23 likely). Investments on rolling stock, containers and handling equipment have been delayed due to supply side constraints. The management remains optimistic on the medium to long-term outlook led by a) strong domestic volume, and b) hopes of improvement in EXIM volume. We cut our FY23-25 estimates by 9-13% to reflect 3QFY23 performance and pressure on operating margins. We roll forward with Mar’24TP of INR 820 (earlier Sep’23TP INR860). Key risks to recommendation are a) delayed recovery in EXIM volume, and b) sub-par capital allocation decisions.

* 3QFY23 summary:

Revenue grew 4% YoY (+9% 3-year CAGR; +1% QoQ) to INR 19.9bn (9%/ 7% below JMFe/ consensus) as a) domestic volume (originating basis) grew by 13% YoY (+16% 3-year CAGR; +8% QoQ) while realisation grew by 8% YoY (+9% 3-year CAGR), and b) EXIM volume (originating basis) fell by 15% YoY (-1% 3-year CAGR; -1% QoQ), partially offset by realisation (+13% YoY/-2%QoQ). Rail freight charges rose 280bps YoY to 57.1% (+290bps QoQ) on account of higher imbalances and empties costs. Land Licence Fee (LLF) of INR 970mn was down 12% YoY (+1% QoQ). EBITDA fell 6% YoY/ -14% QoQ (+5% 3-year CAGR) to INR 4.3bn (18%/19% below JMFe/ Consensus). EXIM margin fell by 5% YoY to INR 3,542/TEU (-3% 3-year CAGR) while domestic EBIT margin fell by 15% YoY to INR 1,702/TEU. PAT grew 3% YoY (+9% 3-year CAGR) to INR 3bn

* EXIM volume weak on global cues and market share loss:

EXIM volume (originating basis) fell by 15% YoY on account of a) weak global cues, particularly exports, and b) increased competitive intensity, leading to market share loss for Concor at Mundra (-600bps to 38% in 9MFY23) and Pipavav Ports (-600bps to 48% in 9MFY23). In order to regain market share, CCRI introduced a new 1+1 scheme that offers free empty repositioning on incremental imports, leading to improved volumes in Dec’22. The management indicated target EBIT margin of 26% for the EXIM segment, which we believe is slightly optimistic and could be achieved over the next 2-3 years.

* Domestic volume maintains strong growth momentum:

On the contrary, domestic volume (originating basis) sustained its momentum growing by 13% YoY as the management continues to work on additional revenue streams (containerisation of bulk

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