Buy Container Corporation Ltd for the Target Rs. 850 by Motilal Oswal Financial Services Ltd
Lower domestic volumes and weak realization drag down performance
* Container Corporation of India’s (CCRI) revenue declined 2% YoY to INR22.8b during 4QFY25 (9% below our estimate). Total volumes grew 8% YoY to 1.34m TEUs, with EXIM/domestic volumes at 1.04m/0.3m TEUs (+12%/-3% YoY). Blended realization fell ~9% YoY to INR16,930/TEU. EXIM/domestic realization stood at INR14,265/INR26,140 per TEU (-8%/-7% YoY).
* EBITDA margins came in at 19% (vs. our estimate of 22.4%). EBITDA declined ~11% YoY and was 23% below our estimate.
* Land License fee for FY25 stood at INR3.7b.
* In FY25, revenue was INR88.6b (+3% YoY), EBITDA was INR19b (-2% YoY), EBITDA margin came in at 21.4%, and APAT was INR13b (+6% YoY).
* In 4QFY25, domestic volumes were impacted by CCRI's decision to avoid low-margin business, congestion on eastern freight corridors, and delays in receiving tank containers intended for bulk cement transport. The company expects 13% growth in total volume in FY26, driven by 10%/20% growth in EXIM/domestic volumes. This would be supported by improved service quality, full first and last-mile connectivity, the commissioning of four new terminals, and the expected launch of the Western Dedicated Freight Corridor (WDFC) up to JNPT by Dec’25.
* Factoring in lower domestic volumes and delay in the commissioning of JNPT to WDFC, we have reduced our revenue/EBITDA/PAT estimates for FY26 by ~7%/6%/5% and for FY27 by ~9%/9%/8%. We reiterate BUY with a TP of INR850 (based on 17x EV/EBITDA on FY27E).
Highlights from the management commentary
* FY25 LLF stood at INR3.7b. The company is looking to surrender some of the underutilized terminals, which would help it maintain FY25-level LLF in FY26.
* To support volume growth and operational complexity, CCRI operated 6,302 double-stack rakes in FY25, up 16% YoY, and scaled its fleet to 388 rakes.
* FY25 saw a capex of INR8.1b for containers, wagons, and terminal upgrades. For FY26, the capex budget is set at INR8.6b, allocated toward fleet procurement, terminal development, and IT infrastructure enhancement.
* For FY26, CCRI is targeting 13% growth in total volume, with 10%/20% growth in EXIM/domestic volumes. The growth will be underpinned by improved service quality, customer-centric logistics, 100% first-mile and lastmile connectivity, and a focus on sustainable operations.
* CCRI has laid the groundwork for long-term expansion, targeting 100 terminals, 500+ rakes, and 70,000 containers by 2028.
Valuation and view
* In FY25, CCRI reinforced its logistics capabilities by expanding double-stack rail operations, leveraging the DFC to boost efficiency, and enhancing its integrated logistics network. CCRI remains focused on scaling up its rail freight services and infrastructure, with an increased capex outlay for the commissioning of new terminals, fleet expansion, and the strengthening of multimodal connectivity.
* Factoring in lower domestic volumes and delay in the commissioning of JNPT to WDFC, we have reduced our revenue/EBITDA/PAT estimates for FY26 by ~7%/6%/5% and for FY27 by ~9%/9%/8%. We reiterate BUY with a TP of INR850 (based on 17x EV/EBITDA on FY27E).
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