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Concor: Exim leads the way - Views on News from Equitymaster
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Concor: Exim leads the way
Apr 24, 2008

Performance summary
  • Sales grow 9% YoY in FY08, 10% YoY in 4QFY08. Growth led by the Exim business (export-import), where sales have grown 8% YoY during the fiscal. Total sales figure lower by 6% as compared to our estimates.

  • Operating margins contract by 2.2%, owing to higher staff costs and rail freight expenses (both as percentage of sales).

  • Net profits grow by 9% YoY during the fiscal, 20% YoY in 4QFY08. Higher other income aid bottomline performance during the quarter. Full year profit figure higher by 4% as compared to our estimates.

Financial performance: A snapshot
(Rs m) 4QFY07 4QFY08 Change FY07 FY08 Change
Sales 8,217 9,036 10.0% 30,573 33,415 9.3%
Expenditure 6,069 6,714 10.6% 21,661 24,388 12.6%
Operating profit (EBDITA) 2,148 2,322 8.1% 8,912 9,027 1.3%
Operating profit margin (%) 26.1% 25.7% 29.2% 27.0%
Other income 203 495 144.3% 846 1,587 87.6%
Depreciation 223 267 20.1% 936 1,061 13.4%
Profit before tax 2,128 2,550 19.8% 8,823 9,553 8.3%
Tax 434 520 19.7% 1,862 1,980 6.3%
Profit after tax/(loss) 1,694 2,030 19.8% 6,961 7,573 8.8%
Net profit margin (%) 20.6% 22.5% 22.8% 22.7%
No. of shares 65.0 130.0
Diluted earnings per share (Rs) 58.3
P/E ratio (x) 15.5

What has driven performance in FY08?
  • Concorís 9% YoY growth in sales during FY08 was largely on the back of volumes growth as realisation (freight rate) remained stable. While volumes grew 15% YoY for Exim business, growth in domestic business stood at 21% YoY. The management indicated in the conference call that freight rates have remained largely stable over the past few quarters on account of competitive pressure from road tariffs. As far as sales growth in value terms is concerned, the same grew 8% YoY and 17% YoY for Exim and domestic business respectively during FY08.

    The JNPT-Delhi route remains the most remunerative for Concor considering that it generates around 60% of the companyís haulage business. The company runs 18 trains per day on this route (additional 2 trains are run by other parties) and plans to take this up to 24 over the next few months.

    Segment-wise performance
    (Rs m) 4QFY07 4QFY08 Change FY07 FY08 Change
    EXIM
    Sales 6,544 7,099 8.5% 24,599 26,438 7.5%
    % share 79.6% 78.6% 80.5% 79.1%
    PBIT margin 27.1% 26.7% 29.5% 27.8%
    Domestic
    Sales 1,673 1,937 15.8% 5,975 6,978 16.8%
    % share 20.4% 21.4% 19.5% 20.9%
    PBIT margin 13.1% 10.7% 17.0% 13.7%
    Total
    Revenue 8,217 9,036 10.0% 30,573 33,415 9.3%
    PBIT margin 24.2% 23.3% 27.1% 24.9%

  • Concorís operating margins recorded a 2.2% contraction during the fiscal. This was on account of a rise in staff costs (due to one time provision made for 6th Pay Commissionís recommendation relating to hike in public sector employeesí pay) and land lease charges. As a matter of fact, these charges for land lease (that Concor pays to Indian Railways) have increased from Rs 250 per container in March 2007 to Rs 500 since September 2007, thus impacting the companyís operating margins. Based on segments, while PBIT margins of the Exim business contracted by 1.7% (to 27.8%), the same for the domestic business declined to 13.7% in FY08, from 17% in FY07.

  • Concorís net profits grew by 9% YoY during FY08, slightly lower than its topline growth. This was on account of the contraction in operating margins during the fiscal. The bottomline growth would have been lower but for the 88% YoY increase in other income (which was largely on account of higher interest income on bank deposits).

What to expect?
At the current price of Rs 905, the stock is trading at a multiple of 12.8 times our estimated FY10 earnings. Concorís FY08 performance has fairly been in line with out estimates. The management has indicated of a 15% YoY and 20% YoY growth in Exim and domestic business respectively during FY09, which we believe is achievable. They have also indicated of stable freight rates and expect to maintain their profitability in this fiscal. We maintain our positive view on the stock.

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