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Concor shares up on cargo growth

LiveMint logoLiveMint 12-06-2014 Pallavi Pengonda

Container cargo volumes across major ports have shown a steady trend at the start of the current fiscal.

Container volumes rose by 3.7% in April and 3.3% in May, according to Religare Institutional Research.

Considering that this growth is visible on a low base, the single-digit improvement is not very exciting.

However, the uptrend is heartening, to say the least. “We believe the low base of the past three years would aid volume growth in FY15/FY16, as would the improvement in macro sentiment,” wrote analysts from Religare in a note on 10 June.

Companies such as Container Corp. of India Ltd (Concor) are expected to benefit from a recovery in container volumes.

Not only that, Concor is in a sweet spot because of other reasons as well. The upcoming dedicated freight corridor (DFC) is expected to benefit the company as demand for rail services is likely to get a boost.

Concor’s balance sheet is healthy (it is a net cash company) with consolidated cash and bank balances worth about `2,700 crore as on 31 March. Additionally, an improvement in the company’s market share is also expected to work favourably for Concor for improving volumes. The company enjoys 79% market share among container train operators.

“Full-year growth in Concor’s Exim (export-import) volume of about 10% surpassed overall about 5.3% growth in container traffic at ports (major ports + Mundra + Pipavav), highlighting market share gains by Concor,” pointed out Nomura Research in its March quarter earnings review note.

Having said that, the company’s March quarter financial results disappointed on some counts. Last quarter, total operating income increased by a tepid 5.3% over the same period last year to about `1,300 crore. The Exim segment disappointed in the March quarter on account of weak realizations. Domestic volume growth was stronger than Exim volume growth during the quarter. Operating profit margin declined by 54 basis points to 20.5% from the year-ago period. One basis point is one-hundredth of a percentage point. Net profit, though, increased at a slightly faster pace of 9% to `246 crore.

While its performance is showing signs of recovery, the share price already seems to have factored in these positives. Since the beginning of this fiscal year, Concor shares have increased by one-fifth and it currently trades at about 21 times its estimated earnings for the current fiscal year.

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