Container corporation of India- Potential 18% upside with a strong growth of 21% in FY22

Container corporation of India was founded in 1988 and is owned by the Indian Railways, Government of India. The company is a part of the logistics sector. The logistics sector of the country is valued at $160 billion as of 2019 and contributes a whopping 14.4% of the GDP.

In the Second quarter of FY22 the revenue, standing at Rs.18.2 billion, saw an upwards growth of 21% YoY mainly due to a domestic growth of 43% YoY and export import growth of 14% YoY. There was a substantial increase in domestic handling volume which increased by 34% YoY. In Q2 FY22, the domestic handling volume grew by 7% whereas the Exim (export import) volume declined by 3%. According to the management, the shortage of containers has stunted the growth of the company which would have otherwise been 10% higher than what it is right now. The PAT increased by 41% YoY to Rs.2.64 billion and there was a 3.6% increase QoQ. The EBITDA Margin fell by 60bps which can be attributed to the fact that the operational efficiency was disrupted due to the container shortage fiasco. The total expenses of the company rose from Rs.11897 million in Q2 FY21 to Rs.13975 million in this quarter, displaying an increase of 17.5% YoY. EBITDA jumped up by 46% YoY to Rs.426 crores due to the increase in operating margins. For the second quarter, the board has decided to pay an interim dividend of Rs.4.

Concor started offering a 50% discount on rail freight for the relocation of empty containers from different ports to hinterland terminals. From September a higher rebate of 75% is to be give to shipping lines if they offer 10k containers per month and a 100% discount if 15k containers are offered.

From October 2021, a pan-India hike of Rs.1000/teu for container handling in terminals is to be initiated. According to managements, the domestic segment will be the higher growth driver in the near future and thus has plans to change the Exim: domestic ratio from 70:30 to 60:40.

Analysts have recommended a BUY call for this share, with a target price of Rs.800. A potential upside of 18% can be estimated from this share.