Container Corp of India (CCRI’s) 2Q top-line grew 16% y/y (5% below HSBCe though in line with consensus). While EXIM revenue growth was up 16% y/y it was more reflective of the haulage rate hike. We expect volumes to have remained flat (details not yet available) on the back of India’s EXIM trade (ex Oil &Gold) (-12% y/y during 2Q), while domestic revenues fell by 6% y/y- a reflection of weak competitive position due to c20% y/y low diesel prices.
EBITDA margin at 21.0% was marginally above our expectation of 20.6% due to relatively better performance across both domestic and EXIM segments. Overall, EBITDA was flat y/y and came 3% below our expectation. Recurring PAT grew 22% and came 9% below our expectation (largely in-line with consensus expectation) due to a higher effective tax rate.
The stock is trading at a 25.2x PE on September 2016e EPS, while our target price implies the stock will trade at 21.5x. A faster-than-expected macro recovery and improved visibility on the western freight corridor’s completion timeline are key upside risks.
We expect CCRI to post 9% EPS CAGR over FY15-18e. Our FY16-17e standalone EPS estimates are 3-7% below consensus. We also expect CCRI’s RoE to average just 14% over FY15-18.
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