Stock Review: CONTAINER Corporation of India’s (Concor)

CONTAINER Corporation of India's (Concor) performance in the September 2010 quarter was creditworthy, given the operational difficulties it had to grapple with during the period. For instance, the oil spill off the Mumbai coast in early August led to a disruption in operations of the country's key port JNPT near New Mumbai for several days. This impacted the movement of goods for players like Concor. To its credit, Concor has been able to show moderate growth year-on-year in the volume of goods transported on its network, both in the exim (export and import) and domestic segments. This was largely due to goods traffic diverted to other ports in Gujarat, like the Mundra port & special economic zone. In addition, a tight check on the cost structure improved Concor's operating profit margin by 130 basis points year-on-year to 27.7% in the quarter, despite a 2.6% drop in income from operations. Senior officials of Concor's management highlighted that a diversion in traffic to other ports located in the western region resulted in a reduction in distance in kilometres of goods transported on their network. This impacted the topline adversely during the quarter. Its net profit was also flat at 206.7 crore in the quarter. The company's total volume of goods (both exim and domestic segments) transported on its network grew nearly 5% during the first half of FY 11 compared with a year earlier.

   But the Concor management is confident of achieving an overall 12% year-on-year growth in the volume of goods transported. The projection is largely based on expectations of a continued momentum in the country's external trade in the second half of the current financial year. India's exports grew by a robust 19.5% and imports by 29.2% between April and August.

   Post results, Concor's stock fell by 1.4% in a flat broader market. It has underperformed the benchmark Sensex in the past three months. Other frequently traded logistics stocks have also lagged the returns earned by the benchmarks during the period. This is mainly because valuations in the past have increased faster than the expected growth in the financials of these companies. At the current level of 1,271.2, Concor's stock trades at a trailing 12-month P/E of 21.4. It factors in the potential improvement in the company's operations in the near term.