Container Corporation Of India - Misses Estimates; Downside Likely To Be Limited: ICICI Securities

Container Corporation of India’s (CONCOR) Q4FY23 performance missed consensus estimates. Key points: 1) EBITDA margin declined further sequentially to 20.5% in Q4FY23 (vs 21.4% in Q3FY23); 2) EBITDA/teu rose slightly owing to better profitability of the domestic segment; 3) on origination basis, EXIM volumes fell 9.3% YoY while domestic volumes rose 9.5% YoY; 4) capex of Rs4.9bn was incurred in FY22 mainly for procuring rolling stock and opening new terminals; 5) Board has recommended the final dividend of Rs2/share, taking the FY23 dividend to Rs11/share.

Going ahead, management expects headwinds to persist in the (profitable) EXIM segment. That said, it expressed confidence that CONCOR would strive to recoup its lost market share and maintain EBITDA margin at FY23 levels. We estimate volume growth of 10% p.a. (FY23: 7.1% YoY) and EBITDA margin improvement to 21-22% (Q4FY23: 20.5%). We introduce FY25E numbers at this stage and roll over to FY25E EPS. We value the stock at 24x (corresponding to 1-SD above mean) FY25E EPS (earlier 26x). Our downward revision of multiple is due to headwinds persisting in EXIM. Our revised target price works out to Rs590 (earlier: Rs575) on 24x FY25E EPS. We upgrade the stock to REDUCE (from Sell) as we expect further downside to be limited owing to possible improvement in margins.

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