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Container Corporation: Higher exports support growth - Views on News from Equitymaster
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  • Feb 4, 2014 - Container Corporation: Higher exports support growth

Container Corporation: Higher exports support growth
Feb 4, 2014

Container Corporation of India Ltd (Concor) has announced its results for the third quarter of the financial year 2013-14 (3QFY14). The company has reported 14.5% year on year (YoY) increase in the topline and a 5.5% YoY growth in the bottomline for the quarter. Here is our analysis of the results.

Performance summary
  • Revenues were up 14.5% YoY during the quarter. For the first nine months of the year (9mFY14), the revenues grew by 16.2% YoY.
  • The operating profits for the quarter registered 8.5% YoY growth with margins at 23.0% versus 24.3% in 3QFY13. For 9mFY14, the operating profits were up 6.0% YoY with margins at 22.7% as compared to 24.81% in 9mFY13.
  • The net profits for the quarter registered a growth of 5.5% YoY with margins at 20.1% versus 21.8% in 3QFY13. For 9mFY14, the bottomline was up 3.4% YoY with net profit margins at 20.0% versus 22.5% in 9mFY13.
  • The Board of Directors has declared an interim dividend of Rs 7 per equity share

Standalone performance snapshot
Rs m 3QFY13 3QFY14 Change 9MFY13 9MFY14 Change
Sales 10,828 12,393 14.5% 31,746 36,878 16.2%
Expenditure 8,195 9,536 16.4% 23,866 28,523 19.5%
Operating profit (EBDITA) 2,632 2,856 8.5% 7,879 8,355 6.0%
EBDITA margin (%) 24.3% 23.0%   24.8% 22.7%  
Other income 840 888 5.6% 2,473 2,572 4.0%
Interest (net) 0 0 nm 0 0 nm
Depreciation 442 468 6.0% 1,271 1,394 9.6%
Profit before tax 3,031 3,276 8.1% 9,081 9,533 5.0%
Pretax margin (%) 28.0% 26.4%   28.6% 25.9%  
Tax 665 780 17.3% 1,939 2,146 10.7%
Profit after tax/(loss) 2,366 2,496 5.5% 7,142 7,387 3.4%
Net profit margin (%) 21.8% 20.1%   22.5% 20.0%  
No. of shares (m)         195  
Diluted earnings per share (Rs)*         49.5  
Price to earnings ratio (x)*         14.8  
* On a trailing 12 months basis

What has driven performance in 3QFY14?
  • The company reported 14.5% YoY growth in the revenues. Segmentwise, the EXIM and domestic segment witnessed 11.8% YoY and 24.8% YoY growth in the revenues on the back of higher volumes. The overall volumes during the quarter witnessed a growth of 13.4% YoY. The volume growth in the EXIM segment (around 80% of the revenues) and domestic segment stood at 13.7% YoY and 11.7% YoY respectively. For the nine months, the overall volumes grew by 10.87% YoY while growth in the EXIM volumes and domestic volumes stood at 10.24% YoY and 14.06% YoY respectively. As per the management, Concorís growth in tonnage surpassed that of railways during the quarter. As such, the market share of Concor improved to 75.9%.The discount scheme also helped the company to achieve higher market share.

    Segmental summary
    (Rs m) 3QFY13 3QFY14 Change 9MFY13 9MFY14 Change
    Revenue 8,611 9,626 11.8% 25,725 29,012 12.8%
    Operating Profits (EBIT)  2,166 2,344 8.2% 6,496 7,005 7.8%
    Operating profit margins (EBITM %)  25.1% 24.4%   25.3% 24.1%  
    Revenue 2,217 2,766 24.8% 6,496 7,005 7.8%
    Operating Profits (EBIT)  186 246 32.6% 539 568 5.5%
    Operating profit margins (EBITM %)  8.4% 8.9%   8.3% 8.1%  

  • On a YoY basis, the volume contribution declined from JNPT port and increased from Mundra and Pipavav port. Portwise, JNPT, Mundra, Pipavav and Chennai contributed to 45.9% , 22.4%, 20.4% and 7% respectively to the EXIM business.

  • The operating profits for the quarter increased by 8.5% with margins at 23% versus 24.3% in the corresponding quarter last year. Segmentwise, the operating profit margins in the domestic segment expanded by 0.5% (YoY) mainly due to better management of the empty running costs. While overall export import imbalance came down in the EXIM segment, the imbalance among ports still remains. The operating profit margins for the EXIM segment stood at 24.4% during the quarter as compared to 25.1% in 3QFY13.

    Cost breakup
    (Rs m) 3QFY13 3QFY14 Change 9MFY13 9MFY14 Change
    Rail freight expenses 6,255 7,283 16.4% 18,298 21,887 19.6%
    as a % of sales 57.8% 58.8%   57.6% 59.4%  
    Employee costs 299 342 14.2% 853 905 6.2%
    as a % of sales 2.8% 2.8%   2.7% 2.5%  
    Other expenses 1,642 1,912 16.5% 4,715 5,731 21.5%
    as a % of sales 15.2% 15.4%   14.9% 15.5%  
    Total expenses 8,195 9,536 16.4% 23,866 28,523 19.5%
    as a % of sales 75.7% 77.0%   75.2% 77.3%  

  • The net profits for the quarter grew by 5.5% YoY. The growth in the bottomline was relatively subdued due to higher operating expenses and higher effective tax rate. The other income for the quarter grew by 5.6% YoY while depreciation expenses also increased by 6% YoY.
What to expect?

It was a decent quarter for the company with volume growth (YoY) across segments for the company. The management has given a guidance of 8% - 9% margins in the Domestic segment. The rebate offer (around Rs 62 crore in 9mFY14) has helped company increase its market share. During the quarter, the company was able to control empty running costs to some extent because of which the margins improved in the segment.

The company has not added any rakes during the quarter. Against a guidance of 20 rakes for FY14, the company is likely to add just 10 rakes during the year. The overall capex guidance for FY14 remains at around Rs 11 bn.

Regarding multi modal logistics park (MMLP) projects; the new land acquisition bill may cause some delay. As per the management, all MMLPs will offer a minimum of 15% internal rate of return.

At the current stock price, the stock is trading at a trailing 12 months price to earnings ratio (TTM PE) of around 14.8. We believe that the upside is limited at current price levels. We recommend that investors should sell the stock at current price levels.

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