Container Corporation of India
Hold
Price: Rs1145 Target Price (Sept 10): Rs1,152

Downgrade to Hold

* EBITDA margin declined due to lower import throughput
(TEUs): Concor reported Net sales of Rs9.59 bn against the estimate
of Rs 9.50 bn. EBITDA margin declined to 26.4% with lower imports
witnessed in Q2 FY10 quarter (see exhibit for export-import
throughput), resulting in reduction of ground rent. Also competitions
from private operators in the domestic routes lead to jockeying for
market share by way of price reduction, leading to decline in margins.
However, with expected volume uptick with the existing pricing, we
believe margins would revert to 27-28% levels.

* Idle rakes reduced: With continued momentum in the domestic route
and the uptick in exports, idle rakes have reduced in the system and
we expect utilisation would increase with continued growth in domestic
and uptick in EXIM.

* View on the stock: We continue to expect earnings growth of 11%
for FY11E to Rs 9.3 bn, leading to EPS of Rs72. The stock trades at
16x, in line with our target multiple. We believe the stock factors in the
potential earnings growth and thus downgrade it to Hold with the
retained target price of Rs 1152.

* Risks: Higher than our volume estimate may lead to higher sales and
PAT growth.