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Concor: Delivers a good performance - Views on News from Equitymaster
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Concor: Delivers a good performance
Apr 28, 2010

Logistics major, Concor has announced its FY10 results. The company has reported a 8% YoY growth in its sales while net profits have declined by 2% YoY. Here is our analysis of the result

Performance summary
  • Sales grow by 13% YoY during 4QFY10, 8% YoY during FY10. Sales from domestic and Export-Import (EXIM) businesses grow by 17% YoY and 6% YoY respectively during the year.
  • Operating margins decline to 26.4% in FY10, from 27.2% in FY09. Higher rail freight costs impact margins.
  • Lower other income and higher depreciation leads to the net profits declining by 2% YoY during the full year. Profits decline 8% YoY during the fourth quarter.

Financial performance snapshot
(Rsm) 4QFY09 4QFY10 Change FY09 FY10 Change
Sales ††††††††† 8,406 ††††††††† 9,505 13.1% ††††† 34,172 †††††† 37,023 8.3%
Expenditure ††††††††† 6,176 ††††††††† 7,305 18.3% ††††† 24,861 †††††† 27,260 9.6%
Operating profit (EBDITA) ††††††††† 2,229 ††††††††† 2,201 -1.3% †††††††† 9,311 ††††††††† 9,763 4.9%
Operating profit margin (%) 26.5% 23.2%   27.2% 26.4%  
Other income ††††††††††††† 506 ††††††††††††† 383 -24.4% †††††††† 2,111 †††††††††† 1,616 -23.4%
Depreciation ††††††††††††† 313 ††††††††††††† 365 16.3% †††††††† 1,159 ††††††††† 1,343 15.8%
Profit before tax ††††††††† 2,422 †††††††††† 2,219 -8.4% ††††† 10,262 †††††† 10,036 -2.2%
Tax ††††††††††††† 540 ††††††††††††† 487 -9.8% ††††††† 2,347 ††††††††† 2,245 -4.3%
Profit after tax/(loss) ††††††††† 1,882 ††††††††† 1,732 -8.0% ††††††† 7,915 ††††††††† 7,791 -1.6%
Net profit margin (%) 22.4% 18.2%   23.2% 21.0%  
No. of shares       ††††††† 130.0 ††††††††† 130.0  
Diluted earnings per share (Rs)*         †††††††††††† 59.9  
P/E ratio (x)*         †††††††††††† 22.3  
* On a trailing 12-months basis

What has driven performance in FY10?
  • The 8% YoY growth in Concorís FY10 sales was on the back of a 6% YoY growth in sales within the EXIM segment. Volumes (number of containers handled) for this segment grew by 1% YoY while average realisation (per container) improved by 5% YoY. The improvement in realisation was owing to higher lead distances and the passing on of the fright cost hike to customers. As for the companyís domestic business, sales grew by 17% YoY, chiefly led by a 19% YoY growth in volumes. Realisation for this segment declined by 2% YoY. This was mainly owing to the volume discounts that Concor offered to its domestic clients. Overall, the companyís management expects volumes to grow by 7-8% during the current fiscal (FY11), with domestic volumes growing at a higher rate of around 12%.

  • Concorís operating margins declined by 0.8% YoY to 26.4% during FY10. Higher freight costs (as % of sales) les to this decline. These costs increased to 57.5% of sales in FY10, from 55.4% in FY09. This rise was due to the two hikes in freight charges by the Railways during the fiscal.

  • Led by weaker operating margins and lower other income, Concorís net profits declined by around 2% YoY during FY10. The decline in other income was owing to lower interest income from the companyís investments.

What to expect?
At the current price of Rs 1,335, the stock is trading at a multiple of 22.3 times its FY10 earnings. Concor's overall FY10 performance has been satisfactory considering that trade activity is yet to pick up pace in India and more so globally. Despite this, the companyís near monopoly status helps it to raise tariffs to pass on any hike in freight costs. The stock has already crossed our initial target of Rs 1,270. We are trying to get a meeting with the companyís management. We will update you with our latest view on the stock post that meeting.

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