Container Corporation of India Limited, BUY
Volume intact – Margin pressure
Price Rs1771 Target Price Rs2584
Concor reported subdued performance during the quarter, essentially due to sharp decline in the margins of the domestic business. The company reported revenue of Rs.8.4bn in Q3FY08, increase of 13.1%. However, EBITDA grew by 4.3% to Rs.2.3bn as EBITDA margins declined by 230bps to 27.3%. Margins were primarily impacted due to decline in the margins of the domestic business. We believe decline in the margins of the domestic side was driven by the company trying increase its market share by giving discounts to the large customers. However, after the subdued growth in the exim business in the last two quarters, the company witnessed 14.9% revenue growth in the segment. Due to lower than expected growth in the last quarter, we are revising our FY08 and FY09 earnings estimates. We expect the company to report EPS of Rs.115.8 in FY08 and Rs.127 in FY09 (our earlier estimates were Rs.126 in FY08 and Rs.141 in FY09). We maintain BUY with revised target price of Rs.2584.
MK,
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