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Container Corporation: Profits remain flat
May 27, 2013

Container Corporation of India Ltd (Concor) has announced its results for the financial year ending 2013 (FY13). The company has reported an 8.5% year on year (YoY) increase in the topline and 7.1% YoY growth in the bottomline for the FY13. Here is our analysis of the results.

Performance summary
  • Revenues were up 15.0% YoY during the quarter. For the full year (FY13), the revenues grew by 8.5% YoY.
  • The operating profits for the quarter registered a 16.0% YoY growth with margins at 21.1% versus 20.9% in 4QFY12. For FY13, the operating profits grew by 2.3% YoY with margins at 23.8% versus 25.2% in FY12.
  • The reported net profits for the quarter were down marginally by 0.5% YoY with margins at 18.3% versus 21.2% in 4QFY12. For FY13, the reported net profits were up by 7.1% YoY with margins at 21.3% versus 21.6 % in FY12.
  • The Board of Directors has declared a final dividend of Rs 9.5 per equity share. This is in addition to an interim dividend of Rs 8 per equity share.

Standalone performance snapshot
(Rs m) 4QFY12 4QFY13 Change FY12 FY13 Change
Sales   10,711 12,316 15.0% 40,609 44,062 8.5%
Expenditure 8,473 9,719 14.7% 30,373 33,586 10.6%
Operating profit (EBDITA) 2,238 2,596 16.0% 10,236 10,476 2.3%
EBDITA margin (%) 20.9% 21.1%   25.2% 23.8%  
Other income 1,126   899 -20.1%  3,165  3,372 6.5%
Interest (net) -     -    nm  -     -    nm
Depreciation 397 456 14.7%  1,585  1,727 9.0%
Profit before tax 2,967 3,040 2.5% 11,817 12,121 2.6%
Pretax margin (%) 27.7% 24.7%   29.1% 27.5%  
Tax 696   781 12.3%  3,038  2,720 -10.4%
Profit after tax/(loss) 2,271 2,258 -0.5%  8,779  9,400 7.1%
Net profit margin (%) 21.2% 18.3%   21.6% 21.3%  
Extraordinary item(one time tax adjustment) 0 0   0 0  
Reported Net profits 2,271 2,258 -0.5% 8,779 9,400 7.1%
Reported net profit margin 21.2% 18.3%   21.6% 21.3%  
No. of shares (m)         130  
Diluted earnings per share (Rs)*         72.3  
Price to earnings ratio (x)*         15.1  
*On trailing 12 months basis

What has driven performance in FY13?
  • The company reported 15.0% YoY growth in the revenues for the quarter. The overall volumes handled during the quarter stood at 6, 85,658 TEUs as compared to 6, 60,482 TEUs, up 3.8% YoY. The growth in the volumes was muted on account of weak macroeconomic conditions. The average realizations for the quarter were up 10.7% YoY. The revenues for the full year were up 8.5% YoY. The overall volumes handled during the year stood at 2,585,652 TEUs, down from 2,604,311 TEUs (down marginally by 0.7%). The average realizations for the year grew by 9.3% YoY.

  • Segment wise, the volumes in the EXIM segment stood at 5, 68,421 TEUs (as compared to 5, 35,575 TEUs) in 4QFY12, up 6.1% YoY. The growth in this quarter was post a decline in the international handling volumes in the second and third quarter. The volumes in the domestic segment stood at 1, 17,237 TEUs, as compared to 1,24,907 TEUs in 4QFY12, down 6.1% YoY. The average realizations for EXIM and domestic segment witnessed a growth of 8.1% YoY and 23.5% YoY respectively. For full year, the volumes in the EXIM segment stood at 21,52,000 TEUs, up 0.7% YoY while the domestic segment volumes stood at 4,33,652 TEUs, down from 4,68,311 TEUs last year, (down 7.4% YoY). The average realizations in the EXIM segment and domestic segment were up by 7.6% YoY and 17.6% YoY respectively in FY13.

  • The operating profits for the quarter grew by 16.0% YoY with margins at 21.1% as compared to 20.9% in 4QFY12. For the quarter, the rail freight expenses increased to 60.9% from 57.5% in 4QFY12 (both as a percentage of sales) on account of tariff hike by railways. However, this was offset by a decline in the employee costs and other expenses (both as a percentage of sales). For full year, the operating profits grew by 2.3% YoY, with operating profit margins at 23.8% (down from 25.2%last year). The margins were also impacted by higher empty running costs during the year. For FY13, the rail freight expenses increased from 57.0% to 58.6% (both as a percentage of sales).

  • Segmentwise, the EBIT for EXIM and domestic segment grew by 2.1% and 91.2% YoY respectively during the quarter with margins at 20.8% (down from 23.4% in 4QFY12) and 11.5% (up from 7.0% in 4QFY12) respectively. For FY13, the EBIT for EXIM segment declined by 1.4% YoY. However, for domestic segment, the EBIT grew by 26.8% YoY respectively. The EBIT margins for EXIM and domestic segment stood at 24.0% (down from 26.4% last year) and 9.7% (as compared to 8.4% last year) respectively.

    Segmental breakup
    (Rs m) 4QFY12  4QFY13  Change  FY12  FY13  Change
    EXIM
    Revenue  8,433 9,673 14.7% 32,656 35,398 8.4%
    Operating Profits (EBIT)  1,970 2,012 2.1% 8,630 8,508 -1.4%
    Operating profit margins (EBITM %)  23.4% 20.8%   26.4% 24.0%  
    Domestic
    Revenue 2,278 2,641 15.9% 7,954 8,662 8.9%
    Operating Profits (EBIT)  159 304 91.2% 665 843 26.8%
    Operating profit margins (EBITM %)  7.0% 11.5%   8.4% 9.7%  

    Cost breakup
    (Rs m) 4QFY12 4QFY13 Change FY12 FY13 Change
    Rail freight expenses 6,161 7,501 21.8% 23,166 25,799 11.4%
    as a % of sales 57.5% 60.9%   57.0% 58.6%  
    Employee costs 293 220 -25.0% 999 1,072 7.3%
    as a % of sales 2.7% 1.8%   2.5% 2.4%  
    Other expenses 2,019 1,999 -1.0% 6,209 6,714 8.1%
    as a % of sales 18.9% 16.2%   15.3% 15.2%  
    Total expenses 8,473 9,719 14.7% 30,373 33,586 10.6%
    as a % of sales 79.1% 78.9%   74.8% 76.2%  

  • The net profits for the quarter declined marginally by 0.5% YoY with net profit margins at 18.3% as compared to 21.2% in 4QFY12. The other income for the quarter declined by 20.1%. However, the depreciation expenses were up 14.7% YoY. The tax expense for the quarter grew by 12.3% YoY. For full year, the net profits were up 7.1% YoY with margins at 21.3%, down from 21.6%last year. The other income and depreciation expenses were up by 6.5% and 9.0% YoY for the year. The tax expenses for the year declined by 10.4% YoY.

What to expect?

The management has given a guidance of 9% YoY for growth in volumes in FY14. Of the total, the volume growth from the EXIM segment is expected to be around 9% YoY while guidance for volumes in the domestic segment is around 4% YoY. The management has suggested that it will be spending around Rs 10.9 bn on capex in FY14. The management does not expect port capacity to increase in FY14. Regarding dedicated freight corridors, the management has suggested the project is progressing well. The lead for EXIM has declined during the year due to fall in volumes from JNPT port. Also, the empty running costs were higher thus impacting the margins. As per the management, the company is facing tough competition and margins are unlikely to touch the levels that were seen in the past. Due to heavy capital investment, the returns on equity are also likely to remain low over the next two three years. At current prices, the stock is trading at a twelve months price to earnings multiple of 15.1. We recommend investors to avoid the stock at current stock prices.

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