Buy Container Corporation of India; target of Rs 468: Prabhudas Lilladher

Prabhudas Lilladher's research report on Container Corporation of India

CCRI reported decent 2Q numbers with strong volume recovery in both EXIM and Domestic segments. On the back of sharp exports surge, Sep’20 saw a YoY growth in volumes handled, thereby indicating bounce-back in global economic activity. The company’s focus on improvement in operational efficiency is seen from the 100bps expansion in Rail freight margins YoY to ~30% by optimizing double stacking of trains and lowering operating cost. Management raised its guidance upwards for handling volumes to ~10% YoY decline in FY21E vs earlier guidance of ~20% YoY decline. We believe CCRI’s unmatched national presence as compared to peers coupled with positive long-term industry prospects would support its prolonged growth and help maintain market leadership. We remain positive on the structural growth story considering 1) continuous market share gains in domestic segment 2) strong EXIM volumes, 3) new strategic initiatives and 4) expected pick-up in economic activity. On the back of strong volume recovery and improved guidance from management, we have revised our FY21 earnings upwards by 7.2%; however, we have kept estimates of FY22E/FY23E largely unchanged.

Outlook

At CMP, the stock trades at a P/E of 31.4x/20.2x FY21E/FY22E earnings and at an EV of 16.7x/11.9x FY21E/FY22E EBITDA. We maintain BUY rating with TP of Rs468 (same as earlier).

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