Container Corporation's Q4FY18 results (Outperformer) - Strong operational performance led by double stacking
Q4FY18 result highlights
- PAT fell 27% yoy to Rs3.1bn: due to high base (export incentive for FY17 recognized in Q4Y17) and higher tax. EBITDA +31% yoy to Rs3.47bn.
- Revenues +13.5% yoy to Rs15.6bn: led by higher exim volumes on improved trade (handling +20% yoy; originating +14% yoy) and domestic (+14% yoy). However, realisations in exim continued to decline (-2.2% yoy) on lower lead distances (higher share of Mundra & East ports vs JNPT). Domestic saw 5% yoy increase in realisations (price hikes).
- Double stacking benefits drive margin expansion: OPM +300bps yoy to 22.2% as exim EBIT margin +240bps yoy to 20% as double stacking jumped ~2.5x yoy, offsetting the impact of empty running costs (+34% yoy to Rs340mn, higher imbalance). Domestic EBIT margins +705bps yoy to 12.5% as realizations offset rise in empty running charges (+60% yoy to Rs320mn, lower cargo in East and South).
- FY18 PAT at Rs10.6bn (+12% yoy): on higher volumes (+12% yoy; pick up in exim trade) and higher OPM (+170bps to 20.6%) as double stack ramped up from Kathuwas. Hence EBITDA +20% yoy to Rs12.1bn.
Conf call highlights: (1) Rs1000/TEU price hike in exim effective 15th May (2) FY19 volume guidance at 10-12% (3) Aim to increase double stacking further by 50% in FY19 led by Khatuwas (Mundra/Pipavav) and Ahemdabad terminals (JNPT) (4) Commissioned 6 new terminals in FY18, targeting 11 more in FY19 (5) Capex for FY18 at Rs8.6bn, Rs8-10bn likely in FY19, (6) Increased market share across domestic (66%) and exim (73.5%) led by higher share at JNPT (81.5%)
Key positives: Sustained volume growth, higher double stacking
Key negatives: higher empty running charges in exim
Impact on financials: No change to FY18/19 EPS of Rs51.4/59.8
Valuations & view
An uptick in port volumes should boost volume growth. The company’s strategic alliances and ramp up in double stacking should help Concor post 17% earnings CAGR over FY18-20E. While investments in logistics parks will impact near term return ratios (long gestation period), we believe these parks will enable Concor to maintain competitive edge and offer seamless logistics solutions to clients over the long term. The stock currently trades at 22x FY20E earnings (25.6x excluding time bound export incentives). Maintain Outperformer
Container Corp. of India is engaged in the transportation of containers by rail, management of ports, air cargo complexes and establishing cold-chain. Though rail is the main stay of Co.'s transportation plan, road services are also provided to cater to the need of door-to-door services, whether in the International or Domestic business. Co. is organized on All-India basis into two major operating divisions which are EXIM and Domestic divisions.
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