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Sunday, August 23, 2015

VRL LOGISTICS LIMITED: BEST PLACED IN SECTOR !!!

Scrip Code: 539118 VRLLOG
CMP:  Rs. 370.30; Market Cap: Rs. 3,378.74 Cr; 52 Week High/Low: Rs. 406.70 / Rs. 261.05
Total Shares: 9,12,43,495 shares; Promoters : 6,34,80,000 shares – 69.57 %; Total Public holding : 2,77,63,495 shares – 30.43 %; Book Value: Rs. 42.92; Face Value: Rs. 10.00; EPS: Rs. 9.67; Dividend: 40.00 %; P/E: 39.26 times; Ind. P/E: 35.64; EV/EBITDA: 13.81x
Total Debt: Rs. 443.35 Cr; Enterprise Value: Rs. 3,805.40 Cr.

VRL Logistics Limited: The Company was founded in 1976 and is headquartered in Hubballi, India. It was formerly known as Vijayanand Roadlines Ltd. and changed its name to VRL Logistics Limited in August 2006. VRL Logistics Limited provides goods and passenger transportation services in India. It offers various goods transportation services, including general parcel and VRL priority, courier, less than truck load, and full truckload services through its transportation network in 28 states and 4 Union Territories. The company came out with an IPO on April 15 2015 offering 2,28,23,333 equity shares of Rs. 10 each for Rs. 205 per share raising Rs. 467.88 Cr. The issue consisted of fresh issue of 57,07,333 of equity shares and offer for sale of 1,71,16,000 equity shares by the seller shareholders. It got listed on April 30, 2015 at Rs. 288 making a high of Rs. 309.00 on listing day. The object of offer for sale was to purchase of goods transportation Vehicles and repayment & prepayment of certain borrowings. The company’s goods transportation service business serves a range of industries, including fast moving consumer goods sector, as well as other industries comprising food, textile, apparel, furniture, appliances, pharmaceutical products, rubber, plastics, metal and metal products, wood, footwear, and machinery. It has a fleet approximately 3,500 owned vehicles. The company also provides bus services in the states of Karnataka, Maharashtra, Andhra Pradesh, Telangana, Tamil Nadu, Gujarat, Rajasthan, and Goa through its owned fleet of approximately 455 buses (including 53 staff buses), including Multi Axle Volvo seater buses, Multi Axle Volvo I-shift sleeper buses, Isuzu seater buses, non-Volvo A/C sleeper, sleeper buses, and semi sleeper buses. In addition, the company engages in liquid transportation and car carrying operations. Further, it is involved in the sale of power and sale of certified emission reductions units generated from operation of wind mills; and provision of air charter services. As of March 31, 2014, company had 81 branch offices of which 74 were leased offices and seven were owned offices, 739 agencies and 416 prepaid agencies for its bus operations business. Company also provide ticketing facilities through its website www.vrlbus.in, as well as through its network of commission agents and online travel agents such as www.redbus.in, www.mybustickets.in, www.makemytrip.com and www.abhibus.com. Company also operate car carrier vehicles for transportation of cars, vehicles for liquid transportation, as well as a courier service business across the State of Karnataka. Company also have minor business interests in wind power, air charter services and hospitality. VRL’s fleet size for goods and passenger transport business grew from 2,730 in 2010 to 3,874 as of March 31, 2014. VRL LOGISTICS LTD is locally compared to Patel Integrated logistics ltd, Transport Corporation of India Ltd, Shreyas Shipping, Costal Roadways ltd, Gati Ltd, Gateway Distripacks Ltd, Allcargo Logistics Limited, Blue Dart Express, Snowman Logistics nationally and globally with Senko Co of Japan, AMERCO Inc of USA, CSX Corp of USA, Con-way Inc of USA, Kansas City Southern of USA, PAM Transportation Services of USA, SixtSE of Germany, VTG Aktiengesellschaft of Germany, Stagecoach Group Plc of United Kingdom, Northgate Plc of United Kingdom, National Express Group Plc of United Kingdom, DSV A/S of Denmark, Dazhong Transportation of China, ComfortDelGro Corporation Ltd of Singapore, CJ Korea Express Corporation of South Korea, Central Japan Railway Co of Japan, CAR Inc of China, Bangkok Metro Public Co of Thailand, Asciano Ltd of Australia, Canadian Pacific Railway Ltd of Canada, USA Truck Inc of USA, Universal Truckload services of USA.

Investment Rationale:
VRL Logistics Ltd owns and operates the largest fleet of commercial vehicles in the private sector in India. VRL has now grown into a logistics and transport company which is currently the largest fleet owner in India with a fleet of 4,077 Vehicles including 373 Passenger Transport Vehicles & 3,704 Goods Transport Vehicles as of 10 May 2015. VRL also has its mentions in the Limca Book of Records as a single largest fleet owner of commercial vehicles in India in the private sector. VRL provides general parcel and priority parcel delivery (less than truckload services, LTL), courier and full-truckload (FTL) services through its widespread transportation network in 28 States and 4 Union Territories across India. Its operational infrastructure for the goods transportation business as of June 30, 2015 comprised 624 branches comprising 604 leased branches and 20 owned branches and 346 agencies across India, and of such 624 branches, 48 (41 leased branches and seven owned branches) served as strategic trans-shipment hubs for its operations. VRL employs nearly 4,506 drivers for its fleet of 4,024 vehicles, who are provided with pension benefits, accident insurance coverage, etc. The company also provides attractive incentives for efficient driving, on-time performance, etc, which increases overall remuneration and hence provides drivers with job satisfaction. The logistics sector presents an incredible arena of opportunity because nearly 90 % of the market is still controlled by the unorganized sector. The Indian logistics industry is expected to grow at 15 % to 20 % per annum, reaching revenues of $38,500 Cr by 2016. The demand for focused supply-chain services has been fuelled by industries with a high propensity to outsource from industries like automobiles, consumer packaged goods, hi-tech, telecom and retail amongst others. In India, Logistics sector has generated employment for near about 4.5 Cr people. India currently spends 12 % to 13 % of its GDP on logistics as compared to 8 % to 9 % in developed economies. For the sectors moving physical products this percentage is much higher because 55 % of India’s GDP is generated by the service sector. The industry as a whole is very fragmented and disorganized. India's logistics sector continues to be attractive for global investors and Investment in logistics in India is projected to grow annually at 10 %. VRL Logistics is differentiated itself in service offerings and building a  large integrated hub-and-spoke transportation network and extensive operational infrastructure, including advanced technology systems which enabled VRL to establish a leadership position in the surface logistics industry with a strong brand name across India. 
VRL’s hub-and-spoke operating model enables it to transport various parcel sizes and provide its customers with access to multiple destinations for booking and delivery of goods, and provide “last mile” connectivity to even remote locations in India. This involves effective consolidation of goods from multiple locations at its trans-shipment hubs, which are continuously operated on a 24X7 basis throughout the year, and redistribution thereof to their respective destinations, resulting in operating and cost efficiencies, optimal capacity utilization of co’s transportation vehicles, rationalization of routes, as well as flexibility in operation, allocation and optimal utilization of resources including manpower. Road transport is competitive even at higher prices given its advantages of flexibility, better service quality and end-to-end delivery. Freight transporters are broadly classified as small fleet operators (SFOs), medium fleet operators (MFOs) and large fleet operators (LFOs) on the basis of number of trucks they own or control. Typically, an LFO is one who owns more than 20 trucks, while SFO is one who owns less than 5 trucks. VRL is one of the largest LFO in India with a fleet of 3,649 trucks. Road freight transportation is highly fragmented, with Small Fleet Owners cornering a high market share of approximately 77 %, as per CRISIL. Low entry barriers have led to a proliferation of small truck operators in SFO segment, resulting in high fragmentation of this segment leading to competition, offering customers better bargaining power also the lack of service differentiation amongst the smaller operator’s results in very competitive pricing. Large fleet operators though enjoy distinct advantages over Small Fleet Operators. Large Fleet Operators typically enjoy scale advantages and provide a variety of value-added services as well such as warehousing, express service, third-party logistics (3PL), consulting, etc. and the key factors impacting the profitability of freight transporters include freight rates, fuel costs, fleet utilisation rates, load flexibility and regulations among others. Given that the industry is highly fragmented, typically, LFOs have a better bargaining power than SFOs due to the contractual nature of the former’s business. LFOs have the flexibility to offer services like full truckload (FTL), less than truckload (LTL) and express cargo transportation. LTL & FTL are higher-margin services. In the express cargo segment, LFOs realise positive cash flow even at 40 % utilisations due to higher realisation per tonne. With this flexibility in the kind of load services being offered, LFOs are able to restrict the impact on their margins during periods of low freight availability. On the cost front, fuel (diesel) is the single largest cost component. LFOs generally operate on a yearly contract basis and include a fuel cost pass-through clause to hedge against hike in fuel prices. However, due to weak freight availability, SFOs who operate largely in the spot market are unable to completely pass on such increases. The implementation of GST is expected only by CY2016. The logistics sector is likely to respond positively to GST by making more use of the hub and spoke systems, large scale warehousing and specialized services. A gradual opening up of key sectors like retail, aviation, defense etc. will also help to boost this sector. The entry of multinational companies (MNCs) in sourcing, manufacturing and distributing could be the other growth drivers.

Outlook and Valuation:
VRL has pioneered in providing a safe and reliable delivery network in the field of parcel service. It has spread its operations to Courier Service, Priority Cargo & Air Chartering to meet the growing demands of its burgeoning customer base. VRL Logistics (VRL) is one of the largest commercial vehicle owners in the Indian private sector, and provides goods transportation and passenger bus operations across India. Its goods transportation segment contributes around 78 % to the company’s FY15 revenues, and its higher-margin parcel delivery business contributes around 77 % to its revenues. 3PL & Warehousing solutions offered by VRL are tailor-made and cater to unique needs of its diverse customer base. With the largest goods transportation network in India, VRL parcel service is indispensable for a large number of Corporate Houses. This network spans the length and breadth of the country and is supported by strategically located transshipment hubs. In the goods transportation business, it serves a number of customers in the FMCG industry as well as in general commodities such as food, textiles, apparel, furniture, appliances, pharmaceutical products, rubber, plastics, metal and metal products, wood, glass, automotive parts and machinery. The company’s hub-and-spoke operating model helps to serve a diverse mix of end-consumers in various industry verticals, which enables it to transport various parcel sizes and provide customers with access to multiple destinations for booking and delivery of goods. Its extensive network with large number of fleets enables VRL to provide last mile connectivity to even remote areas in India. The large fleet, most of which is owned by the Company, enables it to reduce dependence on hired vehicles, retain control of the value chain and service quality, and establish a reputation for reliable and timely delivery of consignments. VRL owns an in-house vehicle body designing facility at Hubli, Karnataka, to build customised vehicles with lighter and longer bodies to carry higher payload, resulting in increased margins per vehicle. The company hires third-party vehicles only during periods of high demand and in emergency situations. Operating owned vehicles enables VRL to significantly reduce vehicle hiring and operational costs. VRL’s large fleet of owned vehicles allows it to cover a large number of routes, and maintain timely delivery of consignments. The variety of goods transportation vehicles in its fleet enables the company to serve a diverse mix of consignments while the range of passenger buses enables to serve transportation requirements of different customer segments. The company’s goods transportation fleet primarily comprises heavy commercial vehicles carrying capacity of more than 7,500 kg with the same accounting for 66 % of its goods transportation fleet as of Mar’15. VRL also enjoys the benefits of economies of scale (discounts, etc.) especially during bulk procurement of key items like vehicle chassis, diesel, tyres, spare parts, etc. The company relies largely on Ashok Leyland to supply it with vehicle chassis as per customised requirements. In the case of spare parts, VRL has entered into supply arrangements with Ashok Leyland and VE Commercial Vehicles who have set up dedicated outlets at the Hubli facility, which allows VRL to source spares parts at competitive rates and reduce procurement timelines. GST will help make India’s manufacturing competitive by cutting high logistics and warehousing costs. Currently, each of India’s 29 states taxes goods that move across their borders at different rates. As a result, freight that moves across the country is taxed multiple times. Worse, there are long delays at inter-state checkpoints, as state authorities review and examine freight and apply the relevant taxes and other levies. Truck delays average five-to-seven hours at inter-state checkpoints. This, combined with other delays, keep trucks from moving during 60 % of the entire transit time. As much as 65 % of India’s freight moves by road, hence GST is critical for India. Simply halving the delays due to roadblocks, tolls and other stoppages could cut freight times by some 20-30 % and logistics costs by an even higher 30-40 %, according to World Bank estimates. This alone can go a long way in boosting the competitiveness of India’s key manufacturing sectors by 3-4 % of net sales. GST, when implemented, will free the decisions on warehousing and distribution from tax considerations, which, henceforth, would be based purely upon operational and logistics efficiency. This will lead to changes in logistics requirements of clients, forcing logistics service providers (LSPs) to rethink their business operations, including creating new warehousing and logistics locations and expanding or closing existing warehouses at certain other locations. GST will score over the existing regime in the transportation and logistics industry, where a tendency is seen to engage with the unorganized players for tax considerations. The GST regime will see the emergence of the organized service providers since taxes will no longer be added costs for the businesses. Given the highly fragmented nature of the Indian transportation and logistics industry (the leading 10 listed firms command less than 5 % of the overall market), implementation of GST is expected to unleash a plethora of opportunities for companies in the organized sector. On financial side, posted a Net Profit (standalone unaudited) of Rs. 35.38 crore posting a strong increase of 40.93 % as compared to Rs. 25.1 crore for the first quarter Q1 FY16 ended June 30, 2015. The Net Profit increased 82.67 % as compared to Rs. 19.37 crore in Q4 FY15. The Total Income from operations increased to Rs. 447.011 crore up 9 % from Rs. 411.36 crore for the quarter. The segment revenue of the Goods transport business increased to Rs. 339.69 crore up 12.66 % in Q1 Fy16. The segment revenue from Bus operations stood at Rs. 94.69 crore in Q1 FY16. The segment revenues from sale of power increased to Rs. 7.1 crore up 10.54 % in Q1 FY16. VRL operates a 42.5MW wind farm in Karnataka, and owns two aircrafts, which provide charter services to corporate clients. The contribution from these non-core businesses remains very small a 1.3 % from wind energy business and 0.7 % from air charter business in FY15. The company came with a successful IPO and those funds would be used mainly for Purchase of goods transportation vehicles and Re-payment/pre-payment of certain borrowings. VRL’s debt totalled Rs. 443 Cr as of FY15, and is expected to decline further as a small component of IPO proceeds approx. Rs. 28 Cr will be used to repay debt. VRL’s ‘net debt to equity ratio’ is expected to fall to almost 0.4 x by FY16 aided by strong free cash flow generation. Despite the industry slowdown, VRL has generated positive FCF in four of the last five years, and we expect FCF generation to continue to improve aided by higher volumes and fleet utilisation. The company plans to spend approximately Rs. 51.8 Cr towards vehicle purchases in FY16. A strong balance sheet provides further headroom for targeting growth. At the current market price of Rs. 370.30, the stock is trading at 28.92 x FY16E. Earnings per share (EPS) of the company for FY16E could be Rs. 12.80 & for FY17E could be seen at Rs. 18.40. It is expected that the company will keep its growth story intact in the coming quarters also with rationalization of haulage charges by IR or Pickup in containerized trade both in EXIM and domestic segment. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also. 

KEY FINANCIALSFY14FY15FY16EFY17E
SALES ( Crs)1,493.801,671.201,814.502,073.10
NET PROFIT (₹ Cr)57.0091.20117.00167.50
EPS ()7.2010.7012.8018.40
PE (x)44.3029.8024.8017.30
P/BV (x)8.207.604.903.80
EV/EBITDA (x)13.9011.2010.408.30
ROE (%)18.6025.6019.8022.10
ROCE (%)9.1916.2216.0219.37

As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % on every purchase(Why Strict stop loss of 8 % ?) - Click Here

*As the author of this blog I disclose that I do not hold VRL LOGISTICS Ltd in my any of the portfolios.

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This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible.
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Saturday, August 15, 2015

69th INDEPENDENCE DAY OF MY INDIA : VANDE MATARAM !!!

                                             !! TURN ON YOUR SPEAKERS !!

{{ Maa Tujhe Salam }} 
 Freedom In The Mind, Faith In The Words.
Pride In Our Souls. Let's Salute The Nation
On This Swatantra Diwas !!
Happy Independence Day to You ALL !!!


वन्दे मातरम् सुजलां सुफलां मलयजशीतलाम् |
सस्य श्यामलां मातरम् 
शुभ्र ज्योत्स्ना पुलकित यामिनीम्
फुल्ल कुसुमित द्रुमदलशोभिनीम्
सुहासिनीं सुमधुर भाषिणीम्
सुखदां वरदां मातरम् ||



"In the attitude of silence the soul finds the path in a clearer light, 
and what is elusive and deceptive resolves itself into crystal clearness.
Our life is a long and arduous quest after Truth " - Mahatma Gandhi 


Salute the national Flag my fellow citizens, and sing the song of freedom's love. Remember how freedom was won. By fighter's struggles, sacrifice ! Pray for the lives lost in the fight. And emulate their examples. Learn to be patriotic more and do your duty with fervor.

*Credits: Ranjan Sharma- Santoor, Sarod, Tabla, Pakhawaj and Tanpura




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Thursday, August 13, 2015

CONTAINER CORPORATION OF INDIA LTD: RATNA OF YOUR PORTFOLIO !!!

Scrip Code: 531344 CONCOR
CMP:  Rs. 1610.90; Market Cap: Rs. 31,408.39 Cr; 52 Week High/Low: Rs. 1947.70 / Rs. 1200.10
Total Shares: 19,49,74,191 shares; Promoters : 12,04,82,495 shares –61.79 %; Total Public holding : 7,44,91,696 shares – 38.21 %; Book Value: Rs. 391.63; Face Value: Rs. 10.00; EPS: Rs. 50.91; Dividend: 134 % ; P/E: 31.37 times; Ind. P/E: 26.47; EV/EBITDA: 17.42x
Total Debt: ZERO; Enterprise Value: Rs. 28,816.34 Cr.

CONTAINER CORPORATION OF INDIA LTD: The Company was incorporated in 1988 and is based in New Delhi, India. Container Corporation of India Limited operates in the Railroads, line-haul operating sector. It provides multimodal logistics support services for export and import, and domestic trade and commerce in India. It primarily engages in carrier business, as well as provides freight transportation services by rail and road and providing inland transport by rail for containers, ports, air cargo complexes and cold chains. The company’s business includes three distinct activities, that of a Carrier, and container terminal operator and warehouse operator which provides various facilities, including warehousing, container parking, repair facilities, and office complexes. In addition, it operates in two divisions – EXIM & Domestic, both the divisions provides services including transit warehousing for import and export cargo; bonded warehousing, enabling importers to store cargo and take partial deliveries; less than container load (LCL) consolidation, and reworking of LCL cargo at nominated hubs; and air cargo clearance using bonded trucking. All the activities of the company revolve around this business and all its operation are in India. As of March 31, 2015, the company operated a fleet of approximately 20,247 owned and leased containers, 52 reach stackers, 17 gantry cranes, and 63 container terminals of which 13 are EXIM terminals, 35 combined container terminals and 15 domestic terminals and 13,111 wagons. CONTAINER CORPORATION OF INDIA LTD is compared to Arshiya Ltd, Kesar Terminals, Transport Corporation of India Ltd, Shreyas Shipping, Gati Ltd, Gateway Distripacks Ltd, Allcargo Logistics Limited, VRL Logistics, Snowman Logistics nationally and globally with AMERCO Inc of USA, CSX Corp of USA, SixtSE of Germany, VTG Aktiengesellschaft of Germany, Stagecoach Group Plc of United Kingdom, Northgate Plc of United Kingdom, National Express Group Plc of United Kingdom, DSV A/S of Denmark, Dazhong Transportation of China, ComfortDelGro Corporation Ltd of Singapore, CJ Korea Express Corporation of South Korea, Central Japan Railway Co of Japan, CAR Inc of China, Bangkok Metro Public Co of Thailand, Asciano Ltd of Australia, Canadian Pacific Railway Ltd of Canada, Con-way Inc of USA, Kansas City Southern of USA. 

Investment Rationale:
Container Corporation of India Ltd. (CONCOR) was incorporated in March 1988 as a Public Sector Enterprise under the Ministry of Railways with the prime objective of developing modern multimodal transport logistics and infrastructure to support the country's growing international trade. The company commenced operations on November 1, 1989, by taking over seven Inland Container Depots from the Indian Railways located at Delhi, Ludhiana, Bangalore, Coimbatore, Guwahati, Guntur and Anaparti. Since then, CONCOR has developed a vast network of container terminals at prime locations all over the country. CONCOR enjoys a near monopolistic situation in the transportation of Containerised cargo through the Indian railways. Container Corporation of India (Concor) is a mini-Ratna Central PSU. The logistics solutions provider is keen on setting up multi-modal logistics parks in nine key industrial hubs of Odisha state. At present, the company is the undisputed market leader having the largest network of 62 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-chains. The company has developed multimodal logistics support for India’s International and Domestic containerization and trade. Though rail is the main stay of the company’s transportation plan, road services are also provided to cater to the need of door-to-door services, whether in international or domestic business. The core business of the company comprises of three distinct activities, that of a carrier, a terminal operator, and a warehouse operator. The company has two wholly owned subsidiaries, M/s. Fresh and Healthy Enterprises Ltd which was set up in 2006 and CONCOR AIR set up in 2012. During the year 2012-13, company entered into a Joint Venture with State Infrastructure and Industrial Development Corporation of Uttarakhand Limited (SIIDCUL) for development of Logistics facilities in the state of Uttarakhand. The Joint Venture Company (JVC) with shareholding of 74 % and 26 % of CONCOR and SIIDCUL respectively named M/s. SIDCUL CONCOR INFRA Company Limited was incorporated on 21 March, 2013. Another Joint Venture Agreement has been signed by company with Punjab State Container and Warehousing Corporation (CONWARE) on 13 March 2013. This 51:49 Joint venture with majority shareholding of CONCOR will be creating Logistics facilities in the state of Punjab Despite the prevalent economic volatility, logistics sector is expected to record a positive growth pace. According to Ministry of Road Transport, the logistics sector is expected to cross US$200 billion by 2020. At present, the sector is worth US$125 billion. In India the cost of logistics is at 13 % to 14 % of GDP where as in developed nations, the cost falls in the range of 7 % to 8 % of GDP. Cost of logistics is a key component in the cost of any product or service. Thus cost of logistics play a very important role in determining the cost of the product offered by the manufacturer or service provider. The major drivers for logistics industry are high economic growth, growth in retail sector, high demand for consumer durables, expansion of auto and auto components sector and of course high growth of international trade. In India, Logistics sector has not been give the requisite attention by the government. Lack of infrastructure is the key drawback for the development of the logistics industry. In addition to that lack of skilled manpower and warehouse facilities are the major roadblocks for the growth of the logistics in India. Thus a large part of the industry still operates in the unorganized sector. For INDIA the Exports for the first quarter (April-June) declined 16.8 % YoY to $66.69 billion compared to the corresponding quarter value of $80.1 billion. Container volumes at major ports for the same quarter grew a mere 3 % YoY to 2 million TEUs. Consequently, Exim volumes for Concor de-grew 3 % YoY to 614353 TEUs, which is the lowest in the past five quarters. It is believed that since Concor enjoys 80 % of market share, it would be the biggest beneficiary of the expected recovery in trade scenario. With the increased capacity in terms of rakes to 256, Concor is well geared to manage higher volumes with expected recovery in trade activities. There has been a need to decongest the existing trunk routes of Howrah- Delhi on the Eastern Corridor and Mumbai-Delhi on the Western Corridor. Due to higher freight rates, coupled with pilferage at various levels, the freight share for railways declined to 30 % compared to that of roadways at 65 %. The surging need for transportation of food grains, coupled with power needs requiring heavy coal movement and booming infrastructure construction and growing international trade have led to the conception of the dedicated freight corridors along the eastern and western routes, which will also benefit CONCOR.

Outlook and Valuation:
Container Corp of India Ltd (CONCOR) is a leading rail freight transporter that is graduating to be a multimodal logistic player. CONCOR is an undisputed leader in the sector.  It is set to benefit from GDP/EXIM revival and DFCs completion that will accelerate containerization. Despite private player’s entering in 2006, it has maintained to retain its leadership in market share that can be attributed to its scale and vantage locations. Long term growth acceleration could come from its pre-emptive capex on multimodal parks. Company enjoys monopolistic situation so has a huge moat. Company has its Economic Moat (A competitive advantage that one company has over the other companies in the same industry – by Warren Buffett) expanding moats which is a very strong sign of a future Multi-bagger stock. On financial side Exim revenues contribute around 84 % of Concor’s total revenues. Exim volumes posted a CAGR of 7 % in FY10-15 with FY15 posting robust growth of 11 % YoY, thereby, hinting towards a revival. Further, container volumes at major ports grew 7 % YoY. Consequently, going ahead, driven by buoyant container volume growth at major ports, it can be expected that Exim volumes for Concor to post a CAGR of 9 % over FY15-17E. Further, as JNPT port is one of the largest volume contributors to Concor, its volumes posted growth of nearly 7 % YoY in FY15. For Q1FY16, port wise volume share from JNPT declined to 42 % as compared to 45 % in FY14. However, the decline in volume share at JNPT was compensated by an increase in share from Mundra and Pipavav port where Concor’s share stood at 25 % and 21 %, respectively. As volumes pick-up at ports, Concor focuses on Exim to improve its earnings. Concor’s revenues grew at a CAGR of 8.5 % in FY11-FY15 as container volumes remained sluggish; except 2014. However, going ahead, with an improved market share in private ports such as Mundra and Gujarat Pipavav, it can be expected that volumes to improve. Further, the government’s “Make in India” campaign will perk up trade volumes for exports. In turn, this will drive higher volumes for Concor. On the EBITDA front also, Concor can post a 21 % CAGR over FY15-17E visà- vis CAGR of 7 % over FY11-15. As EBITDA margins have remained under pressure over the years due to a steep increase in freight rates by railways, going forward, hikes will pause, thereby allowing the company to stabilise its margins. Also, introduction of double stacking and hub and spoke model for its operations is expected to provide further scope to improve margins which can be in the range of 23 % to 25 % in future. Further, introduction of PFTs is expected to improve earnings of the company in future. Consequently, PAT is also expected to post a CAGR of 18 % over FY15-17E against 7 % in FY11-15. Going ahead, with FDI in rail and projects such as dedicated freight corridor and goods and services tax (GST) on the priority list of the government, Concor’s growth and margins will recover at a faster pace. Concor faces intense competition from private operators like In logistics Solutions, Boxtrans Logistics, Gateway Distriparks and Arshiya International as private container rail business is growing gradually which forces these players to have tie-ups with Concor for shipping lines cargo to drive their Exim volumes. Most private players have also accelerated their expansions and rolling stock addition programme to get a share in the Exim business. Another comforting factor is the Healthy balance sheet of CONCOR. Concor today has a cash balance of around Rs. 2,600 Cr on its balance sheet which would yield the company around 7.5 % to 9 % per annum. Concor is of a zero debt company, with substantial cash balance and no funding issues. As GST and DFC are expected to roll out in FY17 and CY18, the near term volume growth for Concor is expected to grow at a CAGR of 9 % over FY15-17E, thereby leading to revenue & earnings CAGR of 20 % each in the same period. Also, PFTs becoming operational in due course of time are expected to add another revenue line for Concor. Further, any near term risk of adverse freight rate movement is expected to be mitigated by higher Exim volume generation. At the current market price of Rs. 1,610.90, the stock is trading at 28.61 x FY16E and about 23.90 x FY17E. Company can post Earnings per share (EPS) of Rs. 56.30for FY16E and of Rs. 67.40 for FY17E. Finally, with a strong balance sheet and superior cash flow company can be assigned P/E multiple of 25x FY17E EPS. It is expected that the company will keep its growth story intact in the coming quarters also with rationalization of haulage charges by IR or Pickup in containerized trade both in EXIM and domestic segment. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also. 

KEY FINANCIALSFY14FY15FY16EFY17E
SALES ( Crs)5,109.005,574.006,556.007,100.30
NET PROFIT (₹ Cr)950.001,048.001,097.001,310.00
EPS ()50.0053.7056.3067.40
PE (x)35.1032.4029.0024.40
P/BV (x)4.804.403.303.50
EV/EBITDA (x)28.5024.2020.5017.20
ROE (%)13.8013.7013.0014.90
ROCE (%)12.8012.0012.7018.70

As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % on every purchase(Why Strict stop loss of 8 % ?) - Click Here

*As the author of this blog I disclose that I do not hold CONCOR Ltd in my any of the portfolios.

*Reader Friends, grab a fresh hot cup of coffee, turn on your net & browse on to www.bhavikkshah.blogspot.in & take out few minutes to get to know the most interesting world of investment... Till then HAPPY INVESTING, don't forget to Share !!

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Disclaimer
This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible.
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Why you should have a Stop Loss of 8% ? Click to know more. Author is also on Facebook and Stockmusings.com

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