Stock market outlook
The current market price of the share is Rs 752.70 each. The stock’s 52-week low is Rs 554 coin, recorded on May 20, 2022. While its 52-week high is Rs 772 coin, recorded on September 09, 2022. The stock is trading at the high of 52 weeks.
Returns over the last 5 years
During the week, the company’s stock gained about 11.62%. While over the past month, the stock has risen 8.08%. Over the past year, the stock has fallen about 1.31%. Over the past 3 and 5 years, the stock has fallen 46.38% and 38.38% respectively.
Strong growth in domestic activity; aggressively focus on profitability
In FY22, Container Corporation of India handled 47.7 MT of containerized freight by rail compared to 42 MT in FY21 (recording a 13.5% year-on-year growth). In terms of TEUs, Container Corporation of India achieved throughput of 4.1 million TEUs in FY22 compared to 3.6 million TEUs in FY21 (showing a growth of 11.8 %). While EXIM volumes were up 8% YoY, domestic volumes were up 32% YoY in FY22.
Over the years, the company has developed its infrastructure and now operates 61 terminals across India, of which six are pure EXIM terminals, 36 are combined container terminals and 17 are pure domestic terminals. Container Corporation of India has also entered into two strategic combinations at various locations.
The company is increasingly focused on profitability and continues to operate more on profitable long-term routes where it faces weaker competition. CONCOR is also improving its value-added services and seeking to generate higher margins through terminal handling and logistics solutions.
Strong growth despite a difficult economic environment; higher volumes and efficiency lead to improved profits
Driven by strong volumes in the domestic segment, Container Corporation of India’s revenue increased 19% year-on-year to INR 75.95 billion in FY22 from INR 63.8 billion. INR during FY21. The company generated a margin of 23% in FY22 (16% in FY21), supported by its strong focus on profitability and the exit from shorter, lower margin routes. Container Corporation of India’s net profit more than doubled to INR 10.6 billion in FY22 (INR 5.9 billion in FY21) thanks to its strong operational performance. The company incurred capital expenditure of approximately INR 6 billion in FY22 mainly due to terminal development/expansion, acquisition of railcars and equipment for handling.
The Land License Fee (LLF) for FY22 was INR 4.7 billion. The Union Cabinet recently approved the land license policy on the long term lease of railway land. The new policy provides for the leasing of railway land for a period of 35 years at 1.5% of the market value of the land per year (currently the LLF is calculated at 6% of the market value of the land). Existing entities, such as Container Corporation of India, will have the option to switch to the new regime after a transparent and competitive bidding process. A comprehensive policy document will be developed and implemented within 90 days of cabinet approval.
Robust infrastructure enables efficient operations
At the end of FY22, the total number of wagons operated by Container Corporation of India (including leased wagons) stood at 16,679. Additionally, it also owned 37,431 containers (owned and leased) in the framework of its operations. Container Corporation of India has launched a tender for the purchase of an additional 10,000 containers. In addition, the company has 108 stackers, 14 gantry cranes and 31 refrigerated power packs of various capacities. This type of infrastructure enables Container Corporation of India to handle high volumes efficiently.
Government initiative to provide significant tailwind to the logistics sector
The Dedicated Freight Corridor (DFC) would be a major volume growth driver beyond FY24 for Container Corporation of India. Over the next couple of years, a large portion of the Western DFC is expected to come on stream, leading to strong volume growth and improved margins for big players like Container Corporation of India. In the 2022 Union Budget, emphasis has been placed on the development of Multimodal Logistics Parks (MMLPs), roads and freight terminals. Work has started on the main pillars of infrastructure development, namely the National Infrastructure Pipeline (NIP), National Monetization Pipeline (NMP) and PM Gati Shakti, which will greatly contribute to the sustainable development of the country. Government initiatives such as: a) “Aatmanirbhar Bharat”, b) setting a target of 25,000 km of new highways, c) Gati Shakti master plan for highways and d) 100 new terminals freight with MMLP will give logistics a big boost. facilities.
Focus on ESG initiatives
Container Corporation of India has recently developed a complete “dust and moisture proof” solution for loading/unloading bulk cement and fly ash in silo and bulk carrier through ISO standard 20′ containers. This bulk cement handling equipment is cost effective and environmentally friendly. Container Corporation of India, in collaboration with Mahavir International, Delhi provided the Covishield vaccine free of charge to approximately 9,200 stakeholders in the Delhi-NCR region. The company has been actively involved in: a) provision of infrastructure and provision of health equipment to primary health centers in Asifabad tribal area, and b) provision of medical equipment to hospitals and at PHCs in the Paderu branch area. The board consisted of four executive functional directors, including a chairman and chief executive, two part-time (government-appointed) directors and five part-time unofficial (independent) directors.
Valuation and vision: Domestic volumes to further drive growth; keep BUY
According to the brokerage, “We expect volumes to increase further as DFCs are phased into service, resulting in an 18% CAGR of revenue in FY22-24E. The LLF for the FY23 is expected to be at INR3.7b, below Supported by lower LLF and improved efficiency from DFC commissioning, we expect EBITDA margin to improve to around 24%, which which will result in a FY22-24E EBITDA CAGR of 23% for the business. We believe that the business would be one of the biggest beneficiaries of the commissioning of the DFC. Furthermore, we do not We have not factored in the possible cost savings that could materialize from the new land leasing policy, as the full policy document would be available 90 days after cabinet approval Any benefits arising from this policy would be additional to the financial performance and target price.”
“We maintain our BUY rating on the stock with a DCF-based target price of INR 870, implying an FY24E EV/EBITDA of 18x,” the brokerage said.
The stock was selected in Motilal Oswal’s brokerage report. Greynium Information Technologies, the author and the respective brokerage are not responsible for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.