Buy Container Corporation of India Ltd For Target Rs.750 - ICICI Direct
LLF issue largely resolved; DFC on the horizon…
About the stock: Concor is the dominant player in the CTO business (66-67% Market share) with 45+ terminals.
* Revenue from rail transportation comprised 75% of the total revenues (rest 4% by road, 13% via handling income, 2% warehousing and 4% others)
* Total volumes handled in FY21 was 3.6 mil TeU, of which EXIM volumes stood at 83% of the mix and rest contributed by domestic containers.
Q1FY22 Results: Volume growth much stronger than expected
* Revenues grew 52% YoY to | 1808 crore, led by volume growth of 35%
* EBITDA margins expanded 1061 bps YoY to 24%, mainly due to lower payment of land license fees (LLF) charges. Subsequently, absolute EBITDA grew 173% to | 434 crore
* PAT grew 3x YoY to | 255 crore, mainly on strong operational performance.
What should investors do?
With the expected commissioning of the WDFC in September, 2021, Concor has infrastructure/facilities close to the DFC route and would be well placed to garner higher volume growth post commissioning of DFC (shift of cargo from road to rail
* We remain positive on the long term growth prospects of the stock and maintain our BUY recommendation
Target Price and Valuation: We value the stock at | 750 i.e. 25x P/E on FY23E EPS.
Key triggers for future price performance:
With easing of uncertainty regarding the LLF issue and rightsizing of its assets, Concor stays a structural growth story that will play a pivotal role in the changing Indian logistics landscape (DFC, cargo containerisation).
* DFC is expected to get operationalised from H2FY22 onwards
* Containerisation of cement, food grains opens newer growth avenues
* Purchase of land from Indian Railways to provide long term clarity to incoming buyer.
Alternate Stock Idea: Apart from Concor, we remain positive on GDL
* Gateway Distriparks (GDL) has a diversified presence in logistics verticals like container train operators (70% of revenues), cold chain logistics, container freight stations
* We have a BUY rating on the stock, with a target price of | 340.
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