IGI Logo

Volume growth to be robust, driven by domestic cargo

Revenue in line; EBITDA below estimate

*  CCRI’s revenue grew 7% YoY to INR23.2b in 4QFY24 (in line). Total volumes increased 11% YoY to 1.24m TEUs with EXIM/Domestic volumes at 0.93m/0.31m TEUs (+10%/+16% YoY; in line).

*  Blended realization declined ~4% YoY to INR18,619/TEU. EXIM/Domestic realization stood at INR15,436/INR28,184 per TEU (1%/-10% YoY).

*  EBITDA margin improved 60bp YoY to 21.1% (vs. our estimate of 23.2%). EBITDA grew 10% YoY and was 8% below our estimate. Sequentially, EBITDA was hit by high other expenses.

*  APAT increased 8% YoY to INR3b (12% below our estimate of INR3.4b); in line with operating performance.

*  In FY24, total volume rose 8% YoY to 4.71m TEUs with EXIM/Domestic volumes at 3.64m/1.07m TEUs (+7%/+12% YoY). FY24 revenue stood at INR86.3b (+6.5% YoY), EBITDA came in at INR19.3b (+4.8% YoY), EBITDA margin was 22.4%, and APAT stood at INR12.4b (+5.8% YoY).

*  The land license fee for 4QFY24 stood at INR830m (INR3.7b in FY24). LLF for FY25 is expected to be INR 4-4.2b.

*  Volume was largely in line with expectation in 4Q. Going forward a) the higher share of double-stacked trains in overall cargo volumes and b) focus of management on increasing First Mile Last Mile service to ~85% of cargo volumes by FY26 would support volumes and earnings. We increase our EBITDA for FY25E/26E by 9%/13% and reiterate our BUY rating with a revised TP of INR1,260 (based on 22x EV/EBITDA on FY26E).

Highlights from the management commentary

*  EXIM volume is projected to grow 15% YoY in FY25 and domestic volume by 25%, resulting in an overall volume growth of 18-20%. Originating volumes are expected to follow a similar trend. Management is expecting margins of ~25% for FY25.

*  Domestic volume growth of 25% in FY25 will be driven by a) the new initiative to carry bulk cement, which will yield full benefits in FY25, and b) the recovery of ~30,000-40,000 TEUs lost in FY24 due to reduced rice volumes.

*  CCRI has applied for the Tughlakabad terminal under the Gati-Shakti scheme, which will reduce LLF provision for FY25 by ~INR 1b. LLF provisioning in FY25 will be ~INR 4-4.2b (excluding Gati-Shakti benefit).

*  CCRI had a market share of ~55% in EXIM containers and ~68% in domestic containers in FY24 (compared to 58% in EXIM and 73% in domestic in FY23

Valuation and view

*  Focus has shifted to increasing the share of rail in the overall modal mix. Increasing double-stacked trains with direct connection to ports will help the company gain higher share of cargo volumes. Further, transportation of bulk cement and pickup in demand of packed cement will help drive volume for the company in FY25 and beyond.

*  With DFC commissioning and a continuous ramp-up in the number of double stacked trains, we expect blended volumes to post 15% CAGR over FY24-26. We expect EBITDA margin to be 24-25% over FY24-26. The stock trades at 18.7x FY26E EV/EBITDA. We reiterate our BUY rating with a revised TP of INR1,260 (based on 22x EV/EBITDA on FY26E). 

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html

SEBI Registration number is INH000000412