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
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