Buy Container Corporation of India; target of Rs 600: ICICI Direct

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ICICI Direct's research report on Container Corporation of India

Container Corporation of India (Concor) reported a strong set of Q1FY20 numbers (ex-SEIS income). Topline grew 9% YoY while PBT grew 16%. The company did not record any SEIS incentive (exceptional income) during the quarter vs. Rs 70 crore in Q1FY19). Therefore, PAT de-grew 10 YoY. The topline growth was devoid of any incremental volume performance (-1% YoY) and was entirely based on realisation growth (~10% YoY). Ex-SIES EBITDA margins grew 324 bps to 24.6% led by adjustments related to the Ind-AS 116 lease accounting. The company has reported accumulated losses to the tune of Rs 175 crore in its subsidiary FHEL in Q1FY20 and has not yet taken any impairment charges for the same. Concor expects coastal services to deliver Rs 150 crore to the topline and establish five centres for distribution logistics in FY19. We have not currently accounted for the changes in IND-AS 116 due to lack of additional information.

Outlook

Concor aims to consistently invest ~Rs 1000 crore annually, which has helped the company to shape up the business around MMLPs (83 in FY19). It is expected to contribute meaningfully in FY20. We maintain BUY with a target price of Rs 600, assigning a P/E multiple of 22x to FY21E EPS of Rs 27.3.

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