MOSL: CONTAINER CORPORATION (Neutral)-Cost efficiencies to drive up margins
​Container Corporation: Cost efficiencies to drive up margins
(CCRI IN, Mkt Cap USD5.2b, CMP INR1391, TP INR1496, 8% Upside, Neutral)
- Revenue grew 5% YoY (but declined 2% QoQ) to INR14.3b, lower than our estimate due to lower than estimated realizations. EBITDA margin was 19.7% (-2.7pp QoQ; +3pp YoY); sequential decline in margin was on account of one-time income of INR400m booked in 1QFY18. EBITDA increased 24% YoY (but declined 14% QoQ) to INR2.82b (v/s our estimate of INR3.4b). PAT at INR2.2b (our estimate: INR2.62b; +41% YoY, -8% QoQ) was boosted by lower tax rate of 20.5% (due to 80IA benefits) as against 27% in 2QFY17.
- Key segmental trends: EXIM segment saw 4% YoY decline in realization to INR22,407/TEU (on originating volumes) as lead distance declined by ~88km due to shift of traffic to Mundra port from JNPT. Despite YoY lower realization in EXIM segment, CCRI increased its EBIT/TEU by 2% YoY, led by higher proportion of double stacking.
- Outlook/management guidance: Management expects lead distance in EXIM segment to further reduce by ~30km (additional realization drop of INR300-400/TEU). Cost efficiencies are likely to improve further due to 100% YoY increase in double stacking from FY17 levels (earlier guidance was 50% increase). The proportion of double stacking will increase due to commencement of two more double-stacking terminals in 1HFY18.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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