In s titu tio n a l E q u itie s

Container Corporation of India

20 September 2021
Reuters: CCRI.NS; Bloomberg: CCRI IN

Uncertainty on LLF; DFC to drive volume, margin expansion BUY

Our analysis of Container Corporation of India’s (Concor) Annual Report FY21 indicates that the company
is following a two-pronged strategy focusing on (1) Strategic shift from being only a freight train operator Sector: Logistics
to 3PL logistics company. (2) Getting the beneficial impact of operationalization of the Dedicated Freight
Corridor (DFC). Concor’s market share in rail-based containerized cargo was 66% in FY21. CMP: Rs733
To help shift to 3PL logistics, the capex in FY21 at Rs5.5bnincluded investments in First Mile Last Mile,
Bulk loading, Distribution Logistics etc. Further, the company is investing in high-end wagons, double- Target Price: Rs1,108
stacked container rakes etc to capitalize on the DFC.
However, we also note that the Land Licence Fees (LLF) is still not finalized and is subject to change given
Upside: 51%
the differences between the Railways and Concor on the total railway land held by the company.
Company Update

Consequently, we expect the company’s privatization to get delayed. To reduce the LLF, Concor has Amit Agarwal
returned 17 terminals held by it on railway land. Research Analyst
We retain our Buy rating on Concor. We have introduced FY24E estimates in this report and have rolled amit.agarwal@nirmalbang.com
over valuation from FY23E to mid-point of FY23E/FY24E. Further, given the uncertainties on LLF, we have +91-22-6273 8033
reduced the multiple from 35x to 30x. Consequently, we have valued the stock at 30x midpoint of
FY23E/FY24E EPS and arrived at a target price (TP) of Rs 1,108.
Key Data
Auditors say LLF not yet fixed: Refer to Note 45 and 59 to the Consolidated Financial Statements, which
describe payment of LLF to Indian Railways for the land leased by it to Concor on the basis of the company's Current Shares O/S (mn) 609.3
assessment and is not final. Mkt Cap (Rsbn/US$bn) 440.9/6.0
Concor has entered into an agreement with the Indian Railways for the utilization of its land for setting up the
company’s terminals and carrying out operations through such terminals. Till FY20, the consideration/LLF payable 52 Wk H / L (Rs) 754/351
for utilizing Indian Railways’ land was in direct correlation with the number of containers handled (TEUs) on such Daily Vol. (3M NSE Avg.) 2,093,882
lands and the LLF rate determined by Indian Railways from time to time.
In FY21, the Ministry of Railways, Government of India, vide its order no.2015/LML-II/13/4 dated 19.03.2020, had
communicated that the LLF applicable on the railway land leased to Concor shall now be charged w.e.f. Price Performance (%)
01.04.2020 at 6% of the value of land, which will be further increased to 7% annually. In reference to the above 1M 6M 1 Yr
change in policy by the Indian Railways, various Divisional Railways have raised demand letters on Concor in
respect of the terminals falling under their jurisdictions. However, land rates considered in the demand letters were CONCOR 11.3 29.1 85.9
not supported with relevant documents and in many cases, the areas of land as per demand and Concor’s records Nifty Index 6.9 19.3 52.8
were different.
In view of the above: (i) The company has paid LLF to Indian Railways on the basis of its assessment and the Source: Bloomberg
same has been disclosed in note. 51 to the Standalone Financial Statements for FY21 and (ii) No Right of Use
(ROU) & Lease Liability has been assessed as required under Ind-AS 116 by the Company for such IR leased
land.
Company has been returning terminals on railway land to reduce LLF: In the past few years, Concor has
been steadily returning terminals on railway land, which did not make economic sense to reduce the burden of
LLF. As shown in the graph (Refer Exhibit 2), the company gradually returned 17 terminals (from 77 in FY19 to 60
in FY21).
Focus on 3PL strategy led to launch of new business verticals: The company is changing focus from a mainly
containerized freight train operator to also be a 3PL logistics player. 3PL logistics implies end-to-end services to
the clients. In this regard, the company has recently launched new business verticals like First Mile Last Mile
(FMLM), Bulk loading and Distribution Logistics. Further, the company is setting up private freight terminals,
expanding through MMLP’s on the DFC network, increased double stacking haul, forayed into Distribution
Logistics, bulk movement of cargo in containers and other value-added services like labelling, palletization
barcoding etc.
Exhibit 1: Key Financials
Y/E March (Rsmn) FY19 FY20 FY21 FY22E FY23E FY24E
Revenues 69,561 65,394 64,271 72,158 93,398 1,13,759
YoY (%) 5.0 (6.0) (1.7) 12.3 29.4 21.8
EBITDA 17,907 16,938 10,470 21,546 30,315 37,561
EBITDA Margin (%) 25.7 25.9 16.3 29.9 32.5 33.0
Adjusted PAT 12,294 4,045 5,054 13,682 19,945 25,074
YoY (%) 14.6 (67.1) 24.9 170.7 45.8 25.7
EPS (Rs) 20.2 6.6 8.3 22.5 32.7 41.2
RoE (%) 11.9 4.0 5.0 12.3 16.2 18.5
EV/EBITDA (x) 25.3 26.4 42.7 20.7 14.7 11.9
P/E (x) 36.33 110.42 88.38 32.64 22.39 17.81
Source: Company, Nirmal Bang Institutional Equities Research
 In s titu tio n a l E q u itie s

Capex of Rs5.5bn to upgrade wagons, new containers: The capex of Rs5.5bn was primarily utilized for (1)
Development/expansion of terminals (2) Acquisition of wagons, handling equipment and IT infrastructure etc.
Concor has identified locations like Dahej, Kandla/Gandhidham and Vapi for further strengthening it’s existing
terminal network.
To improve service, Concor has modified Bogie Low Container (BLC) wagons into Bogie Low Container
Modified (BLCM) rakes with increase in axle load capacity from 20.3tons to 22tons. Further commissioning of
25-ton axle high speed BLCS wagons is under process. During FY21, 8,810 20” containers were inducted into
the fleet and 1,918 containers were off-hired/auctioned. Also, 2 gantry cranes were decommissioned.
Concor - change in organizational structure for faster and decentralized decision making: The company
has reorganized the organizational structure on functional and locational basis. Post the restructuring, the
regions have been reclassified into four areas (North, South, East and West) with two-tier structure comprising
terminals and corporate office. Earlier, the company was organized region-wise.
Exim traffic declines YoY but domestic traffic increases: While the total traffic handled by Indian ports
increased marginally by 0.3% in FY21, Concor’s container shipment in the EXIM segment declined by 3.8% in
FY21. This led to a decline in the company’s market share in the EXIM segment from 65.5% in FY20 to 64.8%
in FY21.
However, in the domestic segment, the total container traffic grew by 2.4% in FY21 and the market share in
the domestic segment increased from 68.5% in FY20 to 77.4% in FY21. (Refer Exhibit 3)
Rs571mn investment in subsidiaries in FY21: Concor invested Rs51mn in Punjab Logistics Infrastructure
Ltd by way of redeemable preference shares and Rs520mn in Angul Sukinda Railway Ltd by way of equity
investment.
The DFC connectivity for Gujarat ports of Mundhra and Pipavav is fully operational and the connectivity to
JNPT is expected to be operational by the end of CY2022. This would help in the following ways:
1. Better utilization of assets - This would lead to improvement in return ratios due to a sharp increase in
the speed of trains.
2. Reduction in unit carrying cost - Ability to carry higher payload per rake due to double-stacking and
higher weight carrying capacity of the new wagons. This would help increase the company’s overall
freight carrying capacity and reduce the cost of freight on a per unit basis.
Maintain Buy rating with TP of Rs1,108 (previously Rs853): We retain our Buy rating on Concor. We have
introduced FY24E estimates in this report and have rolled over valuation from FY23E to the midpoint of
FY23E/FY24E. Further, given the uncertainties on LLF, we have reduced the multiple from 35x to 30x.
Consequently, we have valued the stock at 30x midpoint of FY23E/FY24E EPS and arrived at a TP of
Rs1,108, implying an upside of 51%.

Exhibit 2: Nos of Terminals

Nos of Terminals
90
80 77
72
68
70 63 63
60
60
50
40
30
20
10
0
FY16 FY17 FY18 FY19 FY20 FY21

Source: Company, Nirmal Bang Institutional Equities Research

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Exhibit 3: Traffic Handled (in TEUs)

9,000,000 Traffic Handled (in TEUs)

8,000,000 3,829,419 3,747,758
7,000,000 2,998,206.40
3,531,900
6,000,000 3,102,211
2,924,046
5,000,000
4,000,000 529,952 584,160 593,162
448,178 460,516 607,536
3,000,000
3,001,948 3,245,259 3,154,596 3,035,794
2,000,000 2,475,868 2,641,695
1,000,000
-
FY16 FY17 FY18 FY19 FY20 FY21
Exim Domestic Total
Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 4: Revenue and volume

120,000 1,200,000

100,000 1,000,000

80,000 800,000

60,000 600,000

40,000 400,000

20,000 200,000

- -
FY19 FY20 FY21 FY22E FY23E FY24E
Revenues (in mn) Volumes (in TEU)

Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 5: EBITDA and EBITDA margins

(Rs mn) (%)
40,000 35.0%
35,000 33.0% 30.0%
32.5%
29.9%
30,000
25.0%
25,000 25.7% 25.9%
16.3% 20.0%
37,561

20,000
15.0%
30,315

15,000
21,546

10.0%
17,907

16,938

10,000
10,470

5,000 5.0%

- 0.0%
FY19 FY20 FY21 FY22E FY23E FY24E
EBITDA (Rs mn) EBITDA margin (%)

Source: Company, Nirmal Bang Institutional Equities Research

3 Container Corporation of India

 In s titu tio n a l E q u itie s

Exhibit 6: Net debt to equity

(x)
0.10 0.06
0.05
-
-0.05 FY19 FY20 FY21 FY22E FY23E FY24E

-0.10
-0.15
-0.20
-0.25 -0.21
-0.24
-0.30 -0.27
-0.35 -0.32
-0.40 -0.38
Net debt to equity

Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 7: EPS and EPS growth

45.00 41.15 200%

40.00 171%
150%
35.00 32.73
30.00 100%
25.00 22.45
20.18 46% 50%
20.00 25% 26%
15%
15.00 0%
10.00 8.29
6.64
-50%
5.00 -67%
- -100%
FY19 FY20 FY21 FY22E FY23E FY24E

EPS (in Rs) EPS growth

Source: Company, Nirmal Bang Institutional Equities Research

4 Container Corporation of India

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Consolidated Financial statement

Exhibit 8: Income statement Exhibit 9: Cash flow
Y/E March (Rsmn) FY20 FY21 FY22E FY23E FY24E Y/E March (Rsmn) FY20 FY21 FY22E FY23E FY24E
Net sales 65,394 64,271 72,158 93,398 1,13,759
Profit after tax 4,045 5,054 13,682 19,945 25,074
Growth YoY (%) -6.0 -1.7 12.3 29.4 21.8
Terminal and other service Depreciation 5,444 5,534 6,097 6,641 7,184
42,773 46,745 44,329 55,995 68,325
charges
Employee Benefit Expenses 3,170 4,287 4,117 4,283 4,456 Finance costs 461 429 397 414 432
Other expenses 2,514 2,769 2,167 2,805 3,417 Other income (2,534) (2,704) (2,839) (2,981) (3,130)
EBITDA 16,938 10,470 21,546 30,315 37,561 Others 1,381 1,730 4,586 6,692 8,416
EBITDA growth (%) (5.4) (38.2) 105.8 40.7 23.9
Working capital changes (2,422) 2,270 144 526 605
EBITDA margin (%) 25.9 16.3 29.9 32.5 33.0
Depreciation Operating cash flow 6,374 12,312 22,066 31,236 38,581
5,444 5,534 6,097 6,641 7,184
EBIT 11,494 4,936 15,449 23,675 30,377 Capital expenditure (16,913) (7,782) (8,500) (8,200) (8,200)
EBIT (%) 17.6 7.7 21.4 25.3 26.7 Cash Flow from Investments (430) (319) (666) (699) (734)
Interest expense 461 429 397 414 432 Other income 2,534 2,704 2,839 2,981 3,130
Other income 2,534 2,704 2,839 2,981 3,130
Net cash after capex (8,435) 6,916 15,739 25,318 32,777
Others (8,518) (787) - - -
Earnings before tax Issue/(buyback of equity) - - - - -
5,050 6,425 17,891 26,242 33,075
Tax- total 1,381 1,730 4,586 6,692 8,416 Proceeds/repayment of borrowings (7,007) (82) - - -
Rate of tax (%) 27.3 26.9 25.6 25.5 25.4 Finance costs (461) (429) (397) (414) (432)
Net profit 3,669 4,695 13,305 19,550 24,659 Others 35,734 (2,668) (9,602) (15,450) (20,976)
Share of Profit / (Loss) of joint 398 313 329 345 362
ventures (net) Cash flow from financing 28,267 (3,179) (9,998) (15,865) (21,409)
Minority Interest (22) 45 48 50 52
Adjusted Net Profit Total cash generation 19,832 3,737 5,741 9,454 11,368
4,045 5,054 13,682 19,945 25,074
% growth (67.1) 24.9 170.7 45.8 25.7 Opening cash balance 1,556 21,388 25,125 30,866 40,320
EPS (FD) 6.64 8.29 22.45 32.73 41.15 Closing cash & bank balance 21,388 25,125 30,866 40,320 51,688
% growth -67.1 24.9 170.7 45.8 25.7 Source: Company, Nirmal Bang Institutional Equities Research
Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 11: Key ratios
Exhibit 10: Balance sheet
Y/E March FY20 FY21 FY22E FY23E FY24E
Y/E March (Rsmn) FY20 FY21 FY22E FY23E FY24E
Profitability and return ratios
Equity Share capital 3,046 3,046 3,046 3,046 3,046
EBITDA margin (%) 25.9 16.3 29.9 32.5 33.0
Reserves and surplus 97,423 98,825 1,08,083 1,19,781 1,32,832
EBIT margin (%) 17.6 7.7 21.4 25.3 26.7
Net worth 1,00,470 1,01,871 1,11,129 1,22,827 1,35,879
Net profit margin (%) 5.6 7.3 18.4 20.9 21.7
Minority Interest 1,085 1,040 1,040 1,040 1,040
RoE (%) 4.0 5.0 12.3 16.2 18.5
Loans 700 618 618 618 618
RoCE (%) 11.4 4.8 13.8 19.2 22.3
Other Financial Liabilities: 3,510 5,863 6,156 6,464 6,787
Working capital & liquidity ratios
Provisions 380 1,376 1,322 1,375 1,431
Receivable (days) 9.2 9.1 9.1 9.1 9.1
Other non-current liability 45 39 41 43 45
Inventory (days) 2.1 1.7 1.7 1.7 1.7
Total capital employed 1,06,189 1,10,806 1,20,305 1,32,366 1,45,799
Payable (days) 12.3 19.3 19.3 19.3 19.3
Property, plant and equipment 62,909 65,852 68,255 69,814 70,830
Current ratio (x) 2.5 2.4 2.8 3.3 3.8
Non Current Investments 11,998 12,111 12,717 13,352 14,020
Valuation ratios
Loans 754 782 821 862 905
EV/sales (x) 6.8 6.9 6.2 4.8 3.9
Other non-current assets 12,955 13,187 13,846 14,538 15,265
EV/EBITDA (x) 26.4 42.7 20.7 14.7 11.9
Total non-current assets 88,616 91,932 95,638 98,567 1,01,021
P/E (x) 110.4 88.4 32.6 22.4 17.8
Trade payables 1,554 2,693 2,556 3,181 3,840
P/BV (x) 4.4 4.4 4.0 3.6 3.3
Other current liabilities 9,839 10,278 10,792 11,332 11,898
Source: Company, Nirmal Bang Institutional Equities Research
Provisions (current) 314 324 341 358 375
Total current liabilities 11,706 13,295 13,689 14,870 16,114
Inventories 263 240 228 283 342
Trade receivables 1,646 1,608 1,805 2,337 2,846
Cash and bank balance 21,388 25,125 30,866 40,320 51,688
Loans and advances 135 159 166 175 183
Other current assets 5,847 5,038 5,290 5,555 5,832
Total current assets 29,279 32,170 38,356 48,669 60,892
Net current assets 17,573 18,875 24,667 33,799 44,778
Total capital employed 1,06,189 1,10,806 1,20,305 1,32,366 1,45,799
Source: Company, Nirmal Bang Institutional Equities Research

5 Container Corporation of India

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Rating track
Date Rating Market price (Rs) Target price (Rs)
30 July 2022 Buy 644 853
31 March 2021 Buy 598 703
25 May 2021 Buy 634 742
27 May 2021 Buy 666 853
1 August 2021 Buy 644 853
19 August 2021 Buy 733 924
20 September 2021 Buy 733 1,108

Rating track graph

800

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Not Covered Covered

6 Container Corporation of India

 In s titu tio n a l E q u itie s

DISCLOSURES

This Report is published by Nirmal Bang Equities Private Limited (hereinafter referred to as “NBEPL”) for private circulation. NBEPL is a
registered Research Analyst under SEBI (Research Analyst) Regulations, 2014 having Registration no. INH000001436. NBEPL is also
a registered Stock Broker with National Stock Exchange of India Limited and BSE Limited in cash and derivatives segments.

NBEPL has other business divisions with independent research teams separated by Chinese walls, and therefore may, at times, have
different or contrary views on stocks and markets.

NBEPL or its associates have not been debarred / suspended by SEBI or any other regulatory authority for accessing / dealing in
securities Market. NBEPL, its associates or analyst or his relatives do not hold any financial interest in the subject company. NBEPL or
its associates or Analyst do not have any conflict or material conflict of interest at the time of publication of the research report with the
subject company. NBEPL or its associates or Analyst or his relatives do not hold beneficial ownership of 1% or more in the subject
company at the end of the month immediately preceding the date of publication of this research report.

NBEPL or its associates / analyst has not received any compensation / managed or co-managed public offering of securities of the
company covered by Analyst during the past twelve months. NBEPL or its associates have not received any compensation or other
benefits from the company covered by Analyst or third party in connection with the research report. Analyst has not served as an
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Analyst Certification: I, Amit Agarwal, research analyst and the author of this report, hereby certify that the views expressed in this
research report accurately reflects my personal views about the subject securities, issuers, products, sectors or industries. It is also
certified that no part of the compensation of the analyst was, is, or will be directly or indirectly related to the inclusion of specific
recommendations or views in this research. The analyst is principally responsible for the preparation of this research report and has
taken reasonable care to achieve and maintain independence and objectivity in making any recommendations.

7 Container Corporation of India

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Disclaimer
Stock Ratings Absolute Returns
BUY > 15%
ACCUMULATE -5% to15%
SELL < -5%
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8 Container Corporation of India