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 FINANCIALS	FY14	FY15	FY16E	FY17E
SALES (₹ Crs)	5,109.00	5,574.00	6,556.00	7,100.30
NET PROFIT (₹ Cr)	950.00	1,048.00	1,097.00	1,310.00
EPS (₹)	50.00	53.70	56.30	67.40
PE (x)	35.10	32.40	29.00	24.40
P/BV (x)	4.80	4.40	3.30	3.50
EV/EBITDA (x)	28.50	24.20	20.50	17.20
ROE (%)	13.80	13.70	13.00	14.90
ROCE (%)	12.80	12.00	12.70	18.70

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 !!

*Dear Reader friend, if you enjoyed this article, please do share it with your Friends and Colleagues through Facebook and Twitter, and drop in your valuable thoughts in comment box..

-------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------
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.

---------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------

READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

VIEW THE POWER POINT PRESENTATION ON

RETURN ON CAPITAL

CONTAINER CORPRATION OF INDIA LTD : A VALUED PSU !!!

Scrip Code: 531344 / CONCOR

CMP:  Rs. 939.45; Buy at current levels and buy at every dips.

Short Term Target: Rs. 985.00; Medium to Long term Target: Rs. 1050; STOP LOSS – Rs. 864.30; Market Cap: Rs. 18,316.85 Cr; 52 Week High/Low: Rs. 989.00 / Rs. 637.51

Total Shares: 19,49,74,191 shares; Promoters : 12,04,88,508 shares – 61.80 %; Total Public holding : 7,44,85,683 shares – 38.20 %; Book Value: Rs. 359.99; Face Value: Rs. 1.00; EPS: Rs. 49.47; Dividend: 175.00 %; P/E: 18.99 times; Ind. P/E: 19.48; EV/EBITDA: 10.51.

Total Debt: ZERO; Enterprise Value: Rs. 15,396.63 Cr.

CONTAINER CORPORATION OF INDIA LIMITED: 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. The company came with an IPO in 1994 as a part of Government of India’s disinvestments of 20% of its equity, offering 1,29,97,200 Shares of Rs. 10 each issued at average weighted price of Rs. 76.71 per share. In the year 2008 and 2013, the company issued Bonus Shares in the ratio of 1:1 and 1:2 respectively. CONCOR, 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, 2011, the company operated a fleet of approximately 15,579 containers, 55 reach stackers, 14 gantry cranes, and 61 container terminals of which 18 are export-import container deports and 13 domestic container depots, as well as 10,666 wagons. CONCOR is compared to Gati Ltd and Allcargo Logistics Limited nationally and Globally compared with AMERCO of USA, Arkansas Best Corp of USA, Con-Way Inc of Michigan, CSX Corporation of USA, Quality Distribution Inc of USA, Roadrunner Transportation Systems Inc of USA, Dazhong Transportation Group of China, East Japan Railway Company of Japan, Evergreen International Storage & Transport Corp of Taiwan, Hamakyorex Co Ltd of Japan, Fukuyama Transporting Co Ltd of Japan, Express Transindo Utama Tbk of Indonesia, BTS Group Holdings Public Company Ltd of Thailand Bangkok Metro Public Company Ltd of Thailand, CJ Korea Express Corporation of South Korea, Aurizon Holdings Ltd of Australia, VTG Aktiengesellschaft of Germany, Go-Ahead Group Plc of UK, National Express Group Plc of UK, Northgate Plc of UK, Stagecoach Group Plc of UK, Six Societas Europaea of Germany .

Investment Rationale:

Container Corporation of India is one of the largest multimodal logistics players in India. Currently, the company operates 63 Inland Container Depots (ICDs) across the country. CONCOR was established with the prime objective of developing containerised multimodal door-to-door transportation for India’s Exim and domestic trades. The core business is characterised by three different activities — carrier, operating terminals and warehousing operations. The carrier (rail transportation) is the major revenue driver as the company derives 75 % of total revenue from it. The Indian Multimodal scene has witnessed the advent of multiple container train operators since 2006. Presently, there are 15 container train operators along with CONCOR who have signed Concession Agreements with Indian Railways for running of Container Trains for a period of 20 years, extendable by another 10 years. Almost all the 15 players have commenced their train services. Some of these players have set up their own terminal facilities also. While the operations of the new entrants to the business started in a limited way by two operators in April 2007, the number has now grown to 15 excluding CONCOR and the volumes being transported by these operators have continuously grown with the induction of new rakes. These operators have been using Goods Sheds-terminals of Indian Railways as well, for their operations. The changes in the external business environment, placed emphasis on providing total logistics and transport solutions to its customers by exploring the possibilities of expanding the segments of the transport value chain in the EXIM as well as Domestic segments. CONCOR is hunting for the possibilities for strategic alliances, both for the optimal utilization of infrastructure as well as for expansion into other segments of the value chain. Logistics calls for an understanding, of the total supply chain, the elements of which include inventories, packing, forwarding, freight, storage and handling. Logistics is responsible for all the movement that takes place within the organization whether it is inbound logistics of incoming, raw materials or movement within the company or the physical distribution of finished goods. Typical logistics framework mainly consists of Physical Supply, Internal Operations and Physical Distribution of Goods and Services. To put it more simply, the material supply logistics starts from the base level of “generation of the demand”, through the “process of purchase” and “supply of material from the vendor” right through to “final acceptance” and “payments to the supplier” and “issue to the indenter” and has to be considered as a “one whole activity” with each stage having an impact on price & cost of material supply. Logistics is, in itself, a system; it is a network of related activities with the purpose of managing the orderly flow of material and personnel within the logistics channel. Logistics is not confined to manufacturing operation alone. It is relevant to all enterprises, including Govt. institutions such as Hospitals and schools and service organization such as retailers, banks and financial service organizations. The study of logistics is especially important for bulk raw materials, where substantial outflow of freight is involved. Management of Logistics is an art which is extremely difficult to perfect in India, JIT- just in time ends up being SHIT - somehow in time. The study of logistics is important to establish a lean supply chain which would give an advantage of quick product change over, capability, excellent short and long term forecast visibility and JIT capability. Indian Railways has proposed the creation of a dedicated freight corridor, solely for carrying freight trains, including containers. The dedicated freight corridor is proposed to come up by December 2017, although it is believed that this target could be delayed by one to two years. According to the proposal, on the western side, JNPT- Jawaharlal Nehru Port Trust would be linked to the key Inland Container Deport (ICD) in the National Capital Region (NCR), such as Tuglaqabad and Dadri and further north in Ludhiana. Also, an eastern corridor would connect Ludhiana with Kolkata via the NCR. Currently, only 30 % of India’s EXIM container traffic takes place through rail, while the balance takes place via roadways. With the creation of the dedicated freight corridor, India could also inch closer to the global benchmark of rail/road market share, given that the rail movement of cargo is much cheaper compared with that of road. As such, players in the sector, such as CONCOR, would stand to benefit significantly upon the implementation of the dedicated freight corridor. CONCOR has the huge potential opportunity to ramp-up post creation of dedicated freight corridor. The vastness of India has resulted in manufacturing and consumption centres in the country being geographically apart, necessitating the transportation of cargo. Moreover, ports that are entry & exit points for EXIM cargo are located at distances ranging from 200 kilometres to 3,000 kilometres from manufacturing & consumption centres. However, because of their proximity to Western countries which nearly accounts for a large share of India’s foreign trade, ports on the western coast of India have managed to acquire a majority of the country’s overall EXIM container traffic (based on data from IPA), while major consumption and manufacturing centres are primarily located in north India. Hence, the majority of container traffic movement takes place between western ports and north India. According to industry estimates, these routes account for about 65-70% of overall container traffic.

Outlook and Valuation:

Container Corporation of India Ltd popularly known as CONCOR is engaged in the business of transportation through containerized cargo & trade. CONCOR has been awarded with ‘IT Innovation & Excellence Award 2012’ by Knowledge Resource Development & Welfare Group (KRDWG) for Excellence in Application of MIS in Industry. The company has commissioned two new Terminals at Khodiyar for EXIM & Nagulapally for Domestic traffic. Recently, the government of India has transferred 25,11,195 equity shares of CONCOR along with the shares of selected  9 listed entities to CPSE ETF, which is similar to disinvestment. This share has been transferred to the recently launched Goldman Sachs Mutual Funds Central Public Sector Enterprise ETF, which got listed on 4 April 2014. CONCOR has weightage of 6.40 % in this CPSE ETF consisting of 10 public sector enterprise. Company has shown better performance last quarter, Container Corp of India’s 3QFY14 standalone Net Sales grew by 15 % to Rs. 1,240 Cr, EBITDA grew 9 % to Rs. 286 Cr and PAT grew 6 % to Rs. 250 Cr YoY. Company’s 9 month FY14, Sales grew 16 %, its EBITDA grew 6 %, and its PAT grew 3 % YoY. EXIM volumes were down 1.5 % QoQ and its realization dipped 2 % QoQ driven by weak EXIM trade. However, decrease in EXIM imbalance moderated the segmental PBIT decline to 2 % QoQ. Better traction in the domestic trade was seen its Domestic volumes rose 6.4 % QoQ on company’s aggressive move to acquire customers. It has been running trains in the North ‐ East and North ‐ South routes. The East to North route has been less remunerative for CONCOR due to higher empty running costs in this leg. Earlier CONCOR denied cargo for this route which the management said that they have opened up for customers on marginal cost basis thereby driving its domestic volume growth. The management expects to maintain 8 % ‐ 9 % of segmental PBIT margin in the domestic segment going forward Capex update. During 9MFY14, CONCOR bought 6 new rakes. It would further add 4 rakes in 4QFY14. Company has also acquired land at two places – Nagpur and Raipur towards the PFTs/MMLPs. CONCOR targets its capex of Rs. 1,100 Cr in FY14E and Rs. 6,000 Cr during FY14‐17E which are on track. CONCOR can see 9.5 % & 11 % volume CAGR in the EXIM & Domestic segments during FY13-FY15E period. During the last 9 years, the CONCOR has traded at median P/E multiple of 14.2 x, P/B multiple of 2.9 x and EV/EBITDA multiple of 10.8 x. During these last 8 years, its return ratios have almost halved from 30 % to 15 % as private container operators gained market share thereby intensifying competition while EXIM trade slowed down. At the current market price of Rs. 939.45, the stock is trading at a PE of 14.25 x FY14E. The company can post Earnings per share (EPS) of Rs. 65.90 in FY14E and Rs. 70 in FY15E. One can buy CONCOR with a target price of Rs. 1050.00 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 985.00.

KEY FINANCIALS	FY12	FY13	FY14E	FY15E
SALES (₹ Crs)	4,061.00	4,406.20	5,025.70	5,732.60
NET PROFIT (₹ Cr)	930.00	940.00	1,005.70	1,135.10
EPS (₹)	47.70	48.21	51.58	58.22
PE (x)	20.30	20.10	18.80	16.70
P/BV (x)	3.40	3.00	2.70	2.40
EV/EBITDA (x)	15.80	15.30	13.70	11.70
ROE (%)	16.60	15.90	15.10	15.30
ROCE (%)	24.00	21.70	20.80	21.30

I would buy CONTAINER CORPRATION OF INDIA LTD for Medium to Long term for target of Rs. 1050 and for the shorter term the target would be Rs. 985.00. 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 ₹ 864.30 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

VIEW THE POWER POINT PRESENTATION ON

RETURN ON CAPITAL

CONTAINER CORPORATION OF INDIA LTD: Think Container Think CONCOR !!!

Scrip Code: 531344 / CONCOR

CMP:  Rs. 959.40; Buy at Rs. 940 - Rs.945.
Medium to Longer term Target: Rs. 1020; STOP LOSS – Rs. 875; Market Cap: Rs. 12,388.66 Cr; 52 Week High/Low: Rs. 1133.90 / Rs. 800.55

Total Shares: 12,99,82,794 shares; Promoters : 8,19,99,802 shares –63.09 %; Total Public holding : 4,79,82,992 shares – 36.91 %; Book Value: Rs. 450.50; Face Value: Rs. 10.00; EPS: Rs. 68.38; Div: 155 % ; P/E: 13.94 times; Ind. P/E: 13.33; EV/EBITDA: 10.15.

Total Debt: NIL; Enterprise Value: Rs. 12,212.92 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 Multi-modal 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, 2011, the company operated a fleet of approximately 15,579 containers, 55 reach stackers, 14 gantry cranes, and 61 container terminals of which 18 are export-import container deports and 13 domestic container depots, as well as 10,666 wagons. CONTAINER CORPORATION OF INDIA LTD is compared to Gati Ltd and Allcargo Logistics Limited nationally and with CJ Korea Express Corporation globally.

Investment Rationale:

CONCOR enjoys a nearly monopolistic situation in the transportation of Containerised cargo through the Indian railways. Container Corporation of India (Concor) is a mini-Ratna Central PSU. The company has unveiled its big plans for Odisha. The logistics solutions provider is keen on setting up multi-modal logistics parks in nine key industrial hubs of the state. The new logistics parks are all set to come up at Jharsuguda, Angul, Paradeep, Dhamara, Kalinganagar, Gopalpur, Rayagada, Balasore and Rourkela. Each of these logistics parks would need 30 acres of land and the investment would be in the range of Rs. 50 – Rs. 100 crore. Each park would generate indirect employment for around 3,000 people. The logistics parks will include facilities like warehouse, distribution centers, storage areas, offices, truck services, parking lots, truck terminal, container rail terminal, container handling facilities, cold storages, air cargo points. The establishment of logistics parks would give a big boost to the state's industrial competitiveness. In addition to this such parks would be equipped with weighbridges, telecommunication facilities, banks, health awareness units and recreation centers. The logistics parks to be developed on the public private partnership (PPP) mode, would be served by roads, railways, inland water ways and air ways. Besides logistics parks, Concor is also planning to set up its cold chain infrastructure in the state. Initially, the company wants to set up three such cold chain facilities in the state for storage of green vegetables and other perishable food products. It is also keen on having a dedicated cold storage unit at Bolangir in western Odisha. Besides this the National Horticulture Board along with the Container Corporation of India has flagged off an ‘onion’ freighter from Nashik to Kolkata. About 1,400 tonnes were shipped in 90 special containers, which have been designed to keep the agriculture produce dry and well ventilated. Traders are increasingly attracted to this mode of transport as their produce incurs minimal damage and saves time. Using the railway network, the onions can reach the hinterland faster. Since August last year, the NHB, along with Container Corporation of India (Concor) had been carrying out similar test runs for farm produce such as bananas and potatoes.

Outlook and Valuation:

The company had taken a tariff hike of about 5 % on the key JNPTNVR route to cover increasing operating cost with effect from 15 Nov 2011. This hike in realisation was an offset to some extent by falling lead distance with some originating volumes shifting from JNPT to Pipavav and Mundra for the company. The realization have also increased in the domestic segment, as it has passed a significant portion (not entirely) of the rail haulage hike by Indian Railways (IR) to the customers. Concor today has a cash balance of over Rs. 2,700 Cr on its balance sheet which would yield the company around 9 % to 10 % per annum (versus 7.5 % yield YoY). Company's Q1 net profit was at Rs. 245 Cr v/s Rs. 234 Cr YoY and the income from operations was Rs. 1037 Cr v/s Rs. 949 Cr YoY. 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. For instance, GDL which currently operates 21 rakes would be adding further 6 rakes in the next two years. Also their Faridabad ICD has become partly operational in Q3FY12.While Concor is going slow with their capacity expansion programme. It is expected that the Operational performance & cash flow generation will continue to be healthy even though operational performance of Concor is not at historical high (ROE has fallen from 25 % in FY07 to around 16 % in FY12), still it has one of the highest operating margins of 25 % (Vs. 17 % of GDL). The key reason for fall in ROE for the company is the fall in asset turnover - the asset turnover for Concor has fallen from 0.97 in FY08 to 0.70 in FY12. Similarly asset turnover has impacted the ROCE of the company. This is primarily due to competition where the asset + additional capex are not translating into revenue and profitability as it did historically for Concor. Another comforting factor is the Healthy balance sheet of CONCOR. Concor is of a zero debt company, with substantial cash balance and no funding issues. It is expected that Concor will spend around Rs. 1,652 Cr in FY13E towards capex from which Rs. 760 Cr would be for land acquisition. The cash balance of Rs. 2800 Cr and operating cash flow of about Rs. 1130 Cr in FY13E would very comfortably supports its capex issues. The company doesn't have to take high cost debt in these uncertain times. Concor management has guided for a revenue growth of 7.5 % in FY13E with sustained margins. Company can deliver 4 % volume growth on both Domestic and Exim for FY13E with sustaining operating margins at 25 %. The company added 5 rakes in Q1FY13, taking the total count of new rakes to 218, the company plans to add 30 more rakes in FY13. EXIM volumes this quarter stood at 5,32,539 TEU's (Twenty feet equivalent unit which is the standard size of container) which was higher by 6.2% YoY and lower by 0.6% QoQ. Domestic volumes during this quarter stood at 96,346 TEU which was lowered by 13% YoY & higher by 22.9% QoQ. The Exim realisation per TEU grew by 4.90% YoY & 2.4% QoQ to Rs.16,118/TEU, domestic realisation per TEU grew by 15.4% YoY & 1.7% QoQ to Rs.18,450/TEU. At the current market price of Rs. 959.40, the stock is trading at 13.05 x FY13E and 12.25 x FY14E. Earnings per share (EPS) of the company for FY13E could be seen at Rs. 73.50 and Rs. 78.30 for FY14E . 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. One could BUY CONTAINER CORPORATION OF INDIA LTD with a target price of Rs. 1020.00 

KEY FINANCIALS	FY11	FY12	FY13E	FY14E
SALES (Rs. Crs)	3,828.10	4,060.90	4,588.60	5,211.10
NET PROFIT (Rs. Crs)	876.00	877.90	955.90	1,018.00
EPS (Rs.)	67.40	67.50	73.50	78.30
PE (x)	13.70	13.70	12.60	11.80
P/BV (x)	2.40	2.20	1.90	1.70
EV/EBITDA (x)	9.70	9.00	8.70	7.60
ROE (%)	17.60	15.70	15.20	14.50
ROCE (%)	20.30	20.20	19.60	18.60

I would buy CONTAINER CORPORATION OF INDIA LTD with a price target of Rs. 985 for the short term and Rs. 1020 for the 6 month target. 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 % or Rs. 875.00 on every purchase. 

READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

Container Corporation of India (CONCOR)

Total shares issued- 129982794 shs.

Promoter’s holdings- 81999802 shs- 63.08%

Promoters - President Of India-81998202 shs;

Other Promoters- 1600 shs,

Institutional holdings-22180162 shs-17.07%

52 Week-High-Rs.1275 on 23 Dec 2009;Low-Rs.594 on 23 Dec 2008.
Current Market Price - Rs.1257.20

Market Cap-16442.82cr; AS on 23/12/09

EPS-61.49;P/E-20.57; Ind P/E- 21.00

Book Value-289.44;Price/Book-4.37;Div %- 140

Total Share Capital- 129.98cr:

Net Worth- 3762.21cr; Total DEBT -0;

Incorporated in 1988, Container Corporation of India (CONCOR) is a multi-modal (rail and road) logistics support provider for the country’s exim and domestic trade and commerce, working under the ministry of railways, Government of India. It handles the imports and exports of the country from about 40 dry ports or terminals spread across India. It also enjoys a near monopoly situation in the transportation of Containerised cargo through the Indian railways. CONCOR`s core business is characterised by three distinct activities, that of a carrier, a terminal operator, and a warehouse operator. The key value the company offers is the provision of a single-window facility co-ordinating with all the different agencies and services involved in the containerised cargo trade right from customs, gateway ports, and railways, to road haulers, consolidators, forwarders, custom house agents and shipping lines CONCOR currently provides the only means by which shippers may obtain containerized freight transportation by rail in India. Though rail is the mainstay of its transportation plan, road services are also provided according to market demand and operational exigencies. CONCOR also operates container terminals across the country to cater to the needs of the trade, whether in the export-import or the domestic business.

Financials: - Container Corporation of India registered results for the quarter ended on 30-SEP-2009 as:

Net Sales- Rs. 959.9027 cr v/s Rs. 903.3608 cr on 30-SEP-2008.

Net Profit- Rs. 204.3475 cr v/s Rs. 223.6809 cr on 30-SEP-2008.

Conl- This stock has always being out of the analysts radar,also this stock has being giving a consitant performance over a period of time. Here I have tried to point out the underdog PSU, as the world expects to get out from recession & their EXIM trades to shoot up, INDIA is surely getting a pie from it & this is the company with an 21.03% of RoNW, and with the net profit of 204 cr on sales of 959cr is certainly shine in this space.

Read my Mundra port post for futher view on business.