BUY SUHANI ADILABADKAR RESEARCH REPORT Q3 FY17 CONTAINER CORPORATION OF INDIA LTD

QUARTERLY OUTLOOK & RECOMMENDATION Container Corporation Of India Ltd (CONCOR) reported mixed December quarter results FY17. Revenue declined 5% YOY and stood at Rs. 13304 Mn compared to Rs. 14044 Mn in the current December quarter. Though PAT or Net Profit also declined 10% on yearly basis, sequential growth was strong at 18% in the current December quarter. EBDITA stood at Rs. 3457 Mn compared to Rs. 3584 Mn, YOY exhibiting de-growth of 4% whereas QOQ growth was a strong 13% in the current Q3 FY17. Other Income on the other hand grew positively both yearly and QOQ by 3% & 11% respectively in the current December quarter. Other Income was reported at Rs. 845 Mn against Rs. 820 Mn in corresponding quarter previous year. Operating Expenditure has been reined in as revenue declined both yearly and quarterly. Operating expenditure declined 4% yearly from Rs. 12132 Mn to Rs. 11619 Mn in the current December quarter. On quarterly basis fall was even higher at 6% in Q3 FY17. As a result EBDITA margin improved 46 basis points YOY and was reported at 25.98% against 25.52% corresponding quarter previous year. Sequentially growth was phenomenal at 386 basis points as operating expenditure de-growth outpaced decline in revenue QOQ. Finance costs are extremely low at Rs. 1.40 Mn almost constant YOY. Taxation growth was 0.77% YOY at Rs. 669 Mn in the current December quarter. Net Profit Margin was reported at 13.98% falling 66 basis points YOY compared to same period previous year. CONCOR is an undisputed market leader having 73% market share in containerized traffic and the largest network of 68 ICDs/CFSs in India. In addition to providing inland transport by rail for containers, it has also expanded to cover management of ports, air cargo complexes and establishing cold-chain. The company developed multimodal logistics support for India's International and Domestic containerization and trade. CONCOR’S core business is divided into two main segments, Exim which contributes 80% of total revenues and domestic the rest. The company is expected to perform well in the coming quarter with the increase in traffic in international trade over the previous few months. There has been increase of 9.2% traffic in Exim Business & 1.50% in domestic business in 2016-17 compared to previous year as the company has taken various initiatives such as reduction in dwell time at JNPT, time tabled trains and strategic ties with ports and private terminals. We recommend BUY for the stock for medium & long term investment with PE multiple of 32.04 x FY17E & 28.12 x FY18E with a target price of Rs. 1310.

INDUSTRY

CMP

Rs. 1176.30

TARGET

Rs. 1310.00

TRANSPORT RELATED SERVICES

SCRIP CODE

531344

FACE VALUE

10.00

MARKET CAP

Rs.229343 Mn

52 WEEK Rs. 1235.20/ Rs.844.00 HIGH/LOW SHAREHOLDING PATTERN (%) PROMOTER 54.80 PUBLIC 45.20 OTHERS TOTAL 100.00 In Mn Q3 FY17 Q3 FY16 CHN% REVENUE

13304.10

14043.70

-5%

PAT

1859.90

2056.60

-10%

EBDITA

3457.00

3584.00

-4%

9.54

9.98

-4%

FY16A

FY17E

FY18E

REVENUE

57425.80

54451.71

58426.68

PAT

7875.60

7158.95

8156.26

EBDITA

14262.00

13383.39

14551.88

EPS

40.36

36.72

41.83

PE

29.14

32.04

28.12

EPS In Mn

CONCOR LTD V/S S&P BSE SENSEX

PERFORMANCE METRICS (December Quarter FY17) Profitability Analysis EBDITA (Rs. In Mn)

NET PROFIT GROWTH (Rs. In Mn) 2500

Q3 FY17

3457

2057 2000

1860

1785 1578

Q2 FY17

1500

1000

3051

Q1FY17

3311

500 Q3 FY16

3584

0

Q3 FY16

Q1FY17

Q2 FY17

Q3 FY17

CONCOR reported subdued YOY numbers in the December quarter FY17 though sequential growth was intact with double digit growth for EBDITA, PBT & PAT. Revenue declined 5% YOY and 3% sequentially in the current December quarter. Net Profit bounced back rising 18% QOQ after negative growth over the previous two quarters. PAT stood at Rs. 1860 Mn in the current quarter compared to Rs. 2057 Mn corresponding quarter previous year. Earnings Before Depreciation, Interest, Tax & Amortization (EBDITA) jumped 13% QOQ at Rs. 3457 Mn against Rs. 3051 Mn in the previous September quarter. EBDITA grew in double digits sequentially as operating cost declined 6% QOQ. With higher sequential growth both EBDITA & Net Profit Margins improved phenomenally QOQ rising 386 and 253 basis points. EBDITA margin stood at 25.98% in the current quarter against 25.52% same period previous year. Other Income continued with its September growth momentum rising 11% sequentially and 3% yearly in the current December quarter.

2600 2800 3000 3200 3400 3600 3800

REVENUE GROWTH (Rs. In Mn)

14200

14044

14000

13786 13800 13600 13400

13392 13304

13200 13000 12800 Q3 FY16 Q1FY17 Q2 FY17 Q3 FY17

OTHER INCOME (Rs. In Mn)

NET PROFIT MARGIN 16.00%

Q3 FY17

845

14.64% 14.00%

11.45%

12.00% Q2 FY17

763

13.98%

13.32%

10.00% 8.00%

Q1 FY17

692

6.00% 4.00%

Q3 FY16

820 0

200

400

600

800

2.00% 1000

0.00% Q3 FY16

Q1FY17

Q2 FY17

Q3 FY17

Expenditure Analysis

Rs. In Mn

Q3 FY17

Q3 FY16

RAIL FREIGHT (Rs. In Mn)

CHG% 9000

8111.40

8848.30

-8%

Other Operating Expenses

1560.90

1396.80

12%

Employee Benefit Expense

413.90

Depreciation & Amortization

927.10

852.10

9%

606.10

631.00

-4%

Rail Freight Expenses

Other Expenses

8848

8800 8600

8493

8497

8400 403.90

2%

8200

8111

8000 7800

7600 Q3 FY16 Q1FY17 Q2 FY17 Q3 FY17

Majority of CONCOR terminals are rail-linked and rail is the major carrier for haulage, though facilities with respect to the first and last mile of transportation are also provided through road. Rail link also plays a major role in decongesting its ports and the road corridors that lead to these ports. Thus railway freight expenses account for the largest chunk i.e 70% and was reported at Rs. 8111 Mn in the current quarter against Rs. 8848 Mn same period previous year declining 8% YOY. Other operating expenses constitute the next biggest chunk of 13% of operating cost at Rs.1561 Mn in the current quarter rising 12% YOY & declined 10% sequentially. Employee Benefit Expenses grew 2% YOY at Rs. 414 Mn in the current quarter against Rs. 404 Mn same period previous year. Employee Benefit Expenses constituted 4% of total expenditure with quarterly rise of 2% in the current December quarter FY17.

DEPRECIATION (Rs. In Mn)

INTEREST EXPENSE (Rs. In Mn) 3.50

940

3.00

920 900

2.50 873

880

860

2.00

852

1.50

841

1.50

840

1.40

820

1.00

800

0.50

780 Q3 FY16 Q1FY17 Q2 FY17 Q3 FY17

TAXATION EXPENSE (Rs. In Mn) 800 700

3.00

927

674

685

669 596

600 500 400 300 200 100 0 Q3 FY16

Q1FY17

Q2 FY17

Q3 FY17

0.00 Q3 FY16

0.00 Q1FY17 Q2 FY17

Q3 FY17

EBDITA margin for the current quarter stood at 25.98% compared to 25.52% same period previous year rising 46 basis points. QOQ, EBDITA margin jumped 386 basis points as margin was reported at 22.13% in Q2 FY17. EBDITA margin seems to be under pressure yearly as Revenue declined at a higher rate of 5% YOY whereas Operating Expenditure fell 4%. Depreciation constituting 8% of the total expenditure jumped 9% YOY. On quarterly terms, rise was 6% from Rs. 873 Mn to Rs. 927 Mn in the current December quarter. Interest Expenditure was almost negligible at Rs. 1.40 Mn in the current Q3 FY17. On yearly basis interest or finance costs were almost constant and quarterly there was a fall of Rs. 1.60 Mn or 53% in the current December quarter. Taxation expenditure accounted 5% of total revenues in Q3 FY17. Taxation expenditure stood at Rs. 669 Mn against Rs. 674 Mn corresponding quarter previous year. On quarterly basis, Taxation expenditure grew 12% and declined 0.77% YOY. Total expenditure including interest cost and taxation constituted 92% of the total revenue in the current December quarter against 91% same period previous year.

Segment Revenue Analysis

REVENUE MIX Rs. In Mn

EXIM

Q3 FY17

Q3 FY16

CHG%

DOMESTIC 20%

10580.90

11327.00

-7% EXIM 80%

DOMESTIC

2723.20

2716.70

0%

Concor’s core business is structured in two main segments, Exim business comprising of operating dry ports (icds/cfss) and running exim trains and domestic business comprising of operating domestic container terminals and running dso trains. In addition to these, the company has also entered into the business port terminal operations through joint venture alliances. EXIM which contributes 80% of revenues and exhibited de-growth of 7% YOY and 6% quarterly. EXIM revenues stood at Rs. 10581Mn in the current quarter compared to Rs. 11327 Mn corresponding quarter previous year. Domestic Business was stagnant YOY but witnessed growth of 9% sequentially. Domestic revenues stood at Rs. 2723 Mn in the current December quarter against Rs. 2488 Mn in previous September quarter.

Corporate Profile Container Corporation of India Ltd. (CONCOR), was incorporated in March 1988 under the Companies Act, and commenced operations from November 1989 taking over the existing network of 7 ICDs from the Indian Railways. From its humble beginning, it is now an undisputed market leader having the largest network of 68 ICDs/CFSs in India. In addition to providing inland transport by rail for containers, it has also expanded to cover management of Ports, air cargo complexes and establishing cold-chain. It will continue to play the role of promoting containerization in India by virtue of its modern rail wagon fleet, customer friendly commercial practices and extensively used Information Technology. The company developed multimodal logistics support for India's International and Domestic containerization and trade. Though rail is the main stay of its transportation plan, road services are also provided to cater to the need of door-todoor services, whether in the International or Domestic business. COCOR has 12 successful joint ventures including two subsidiaries as following:       

4 JVs for icd/cfs operations at dadri. 1 JV for operating an icd in nepal. 2 JVs for operating port terminals in India. 1 JV for comprehensive logistics solutions. 1 JV for air cargo operations. 1 JV for development of rail connectivity in the state of Odisha. 2 JVs (subsidiary) for development and operations of mmlp

CONCOR’s major JV partners include:    

Major shipping lines like MAERSK, CMA-CGM, TRANSWORLD, MSC ETC. Major logistics players like TCI. Public sector/ govt. undertakings like HAL, PSWC & SIDCUL ETC. International port terminal operators like APM TERMINALS, DP WORLD ETC.

Financial Analysis QUARTERLY PROFIT & LOSS STATEMENT OF CONCOR LTD FROM 30th June 2016 TO 31st March 2017E

VALUE

30-June-16

30-Sep-16

31-Dec-16

31- March-17E

Rs. In Million

3 months

3 months

3 months

3 months

13392.20

13786.10

13304.10

13969.31

OTHER INCOME

691.90

762.70

845.20

929.72

TOTAL INCOME

14084.10

14548.80

14149.30

14899.03

EXPENDITURE

-10773.60

-11498.10

-10692.30

-11333.84

EBDITA

3310.50

3050.70

3457.00

3565.19

DEPRECIATION

-840.80

-873.20

-927.10

-945.64

PROFIT BEFORE INTEREST & TAX

2469.70

2177.50

2529.90

2619.55

0.00

-3.00

-1.40

-1.43

PROFIT BEFORE TAX

2469.70

2174.50

2528.50

2618.12

TAX

-685.20

-596.10

-668.60

-681.97

PROFIT AFTER TAX

1784.50

1578.40

1859.90

1936.15

EQUITY CAPITAL

1949.70

1949.70

1949.70

1949.70

FACE VALUE

10.00

10.00

10.00

10.00

EPS

9.15

8.10

9.54

9.93

INCOME FROM OPERATIONS

INTEREST

ANNUAL PROFIT & LOSS STATEMENT OF CONCOR LTD FROM 2015 TO 2018E VALUE

31- Mar-15

31- Mar-16

31- Mar-17E

31-Mar-18E

Rs. In Million

12 months

12 months

12 months

12 months

INCOME FROM OPERATIONS

55737.00

57425.80

54451.71

58426.68

OTHER INCOME

3707.40

3446.60

3229.52

3391.00

TOTAL INCOME

59444.40

60872.40

57681.23

61817.68

EXPENDITURE

-42771.80

-46610.40

-44297.84

-47265.79

EBDITA

16672.60

14262.00

13383.39

14551.88

DEPRECIATION

-3726.90

-3646.00

-3586.74

-3658.48

PROFIT BEFORE INTEREST & TAX

12945.70

10616.00

9796.65

10893.41

0.00

0.00

-5.83

-6.12

PROFIT BEFORE TAX

12945.70

10616.00

9790.82

10893.41

TAX

-2469.00

-2740.40

-2631.87

-2737.15

PROFIT AFTER TAX

10476.70

7875.60

7158.95

8156.26

-1.20

-6.30

0.00

0.00

NET PROFIT

10475.50

7869.30

7158.95

8156.26

EQUITY CAPITAL

1949.70

1949.70

1949.70

1949.70

RESERVES

74407.20

79108.60

86267.55

94423.80

FACE VALUE

10.00

10.00

10.00

10.00

EPS

53.73

40.36

36.72

41.83

INTEREST

EXRAORDINARY ITEMS

Ratio Analysis Year

FY 15A

FY 16A

FY 17E

FY18E

53.73

40.36

36.72

41.83

NPM

18.79%

13.70%

13.15%

13.96%

EBDITA MAGIN

29.91%

24.84%

24.58%

24.91%

ROE

13.72%

9.72%

8.12%

8.46%

BOOK VALUE

391.63

415.75

452.47

494.30

P/BV

3.00

2.83

2.60

2.38

PE

21.89

29.14

32.04

28.12

EPS

Current Scenario Indian Railways registered a marginal growth of 0.6% in originating loading of cargo, from 1097.58 million tonnes in 2014-15 to 1104.17 million tonnes in 2015-16. Originating containerized cargo transported by rail has decreased from 48.84 million tonnes in 2014-15 to 46.18 million tonnes in 2015-16 reflecting a decline of 5.45%. The inland penetration of containers from Ports to hinterland by rail was around 19%, which is quite less due to high rail haulage costs and poor turnaround. The containers handled at all ports of the country registered a growth of 3.83% from 11.53 million TEUs in 2014-15 to 11.97 million TEUs in 2015-16. While Mundra Port registered a growth of 9.90%, Pipavav Port registered a decline of 11.23% in container handling in 2015-16 as compared to 2014-15. Krishnapatnam Port continued to register a healthy growth of around 30% in 2015-16 over 2014-15 in container handling. The largest container handling port of the country, JN Port recorded a marginal increase of 0.54%, from 4.47 million TEUs in 2014-15 to 4.49 million TEUs in 2015- 16. In value terms, total exports of the country declined by 15.9% from 310.3 billion dollars in 2014-15 to 261.1 billion dollars in 2015-16. Imports of the country experienced a decline of 15.3% from 448 billion dollars in 2014-15 to 379.6 billion dollars in 2015-16. The steep drop in exports in agricultural commodities like rice, wheat, de-oiled cake and guar gum had a huge impact. The main reason for the drop in agricultural commodities was the crash in global commodity prices besides extensive crop damage from unseasonal rain and hail storms in large parts of north, west and central India. The end of a decade long commodity boom hit Indian farm exports hard. India’s farm exports had surged almost six folds from 7.5 billion dollars to 43.25 billion dollars between 2003-04 and 2013-14. They fell to 39 billion dollars in 201415 and further to 32.5 billion dollars during 2015-16. That translates into a decline of 10.7 billion dollars or roughly Rs. 49000 crores when compared from 2015-16 to 2013-14. During 2015-16, the EXIM container traffic handled at major ports and the private ports of Mundra, Pipavav and Krishnapatnam Port increased by 3.83% as compared to 2014-15. The total traffic handled in domestic segment was 448,178 TEUs in 2015-16 as against 489,371 TEUs in 2014-15 i.e. a decrease of 8.42 %. In terms of tonnage, the decrease in domestic originating loading was 9% from 6.77 million tonnes in 2014-15 to 6.16 million tonnes in 2015-16. During the same period, domestic containerized loading of Indian Railways experienced a decline of 13.62% from 10.50 million tonnes in 2014-15 to 9.07 million tonnes in 2015-16. The primary reason for reduction in domestic business was increase in rail haulage charges by Indian Railways coupled with corresponding reduction in diesel prices that resulted in shifting of cargo from rail to road.

Comparative Analysis (Standalone) EPS (Rs)

REVENUE (Rs. In Mn)

PAT (Rs. In Mn)

EBDITA (Rs. In Mn)

MKT CAP (Rs. In Mn)

CONCOR

9.54

13304.10

1859.90

3457.00

229343.21

ACE

0.36

1979.89

48.28

123.51

6495.40

SANGHVIMOV

5.42

1331.39

234.45

920.55

10135.90

NAVKARCORP

1.49

872.08

212.68

367.41

28892.40

Q3 FY17

SUHANI ADILABADKAR [email protected] 9701063320

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