Container Corporation's Q3FY19 results (Outperformer) - Weak quarter
Q3FY19 result highlights
- PAT fell 5% yoy to Rs2.75bn: on high base as 3QFY18 had recognised 9MFY18 SIES income of Rs1.85bn. Earnings were below estimates on lower than expected margins in the quarter.
- Revenues +8% yoy to Rs15.7bn: on 7% yoy volume growth (originating +1% yoy) and marginal improvement in realisations (exim +0.9% yoy; domestic +1.5% yoy). The realisation increase is led by Rs1000/TEU freight hike in May-18 and Rs1500/TEU service charge hike in Aug-18.
- Margins improve yoy, albeit see decline on qoq basis: OPM +340bps yoy to 21.2% on low base as also freight and service hike in May-18 /Aug-18. However, margins fell sharply on qoq basis by 225bps led by 330bps qoq drop in exim margins to 19.1% led by lower double stacking in the quarter (-100rakes or -12% qoq), 45-day free storage at terminals and impact of 5% hike in haulage rates not passed on to customers. This was offset partially by lower empty running charge (-16% qoq to Rs317mn in exim, total +4% yoy to Rs624mn). Domestic margins at 7.2% (+700bps yoy) on low base. EBITDA +29% yoy to Rs3.34bn.
Conf call highlights: (1) 25% discount on empty charges effective 1st Jan-19 should aid margins in 4Q19 (typical empty costs is Rs600-650m/quarter. (2) Adding 270+ DFC compliant rakes starting from 2HFY20 at a capex of Rs45bn over the next 5 years (3) Concor has started costal shipping business and expects the services to ramp up over the next 1-2 years (4) Foray into international market with entry in Russia (limited investment) and Egypt (Rs2.5bn invt) (5) Rs7.5bn capex in FY19; Rs60-80bn over FY17-22
Impact on financials: FY19/20 EPS cut by 6%/7% to Rs19/21
Valuations & view
We believe rail evacuation and muted exim trade has impacted Concor’s 3QFY19 performance. We believe the volumes have bounced back as per Indian railway data and would aid volumes going forward. Further, as new DFC rakes are commissioned in 2HFY20, double stacking would improve and would thereby enable 14% EBITDA 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 24.5x FY20E earnings (29x excluding time bound export incentives). 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.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.