Concor: Moving slowly

The logistics player's top line growth has been fairly good but margins are under pressure.

With the export-import volumes at the third JNPT terminal picking up smartly the Rs 3,341 crore logistics player Container Corporation was able to post a 12 per cent growth in revenues in the March 2008 quarter.

So, even though the operating profit margin fell 160 basis points to 25.7 per cent, the street was not too unhappy with the numbers.

The lower margins resulted mainly from higher land lease costs ""-for inland container depots (ICDs) an container freight stations(CFS)""and employee costs. Concor's margins for FY08 thus came off by 200 basis points to 27 per cent.

The exim segment saw volumes grow an impressive 20 per cent well above the average growth in the first three quarters and contributed nearly 79 per cent of the firm's top line of Rs 904 crore.

However, realisations for the segment fell by nearly 9 per cent . That's because earlier in the year Concor had started charging customers a lower haulage rate for 40 feet containers, apart from reducing terminal handling charges by about 15 per cent.

The domestic segment saw volumes grow just under 4 per cent in the March quarter, partly due to a high base effect. However, realisations were up a smart 15.3 per cent as it entered into corporate tie-ups with players such as IOC and Indo Rama to be their exclusive transporter and win assured business.

Nonetheless, margins were weak as Concor is possibly trying to compete with road transporters by giving clients volume ""based discounts.

While competition from new entrants is imminent, Concor's infrastructure""-ICDs and wagon fleet""should stand it in good stead.

Besides, it is trying to offer end-to end logistics solutions to companies, though as of now it doesn't seem to have too much pricing power. Concor is expected to end FY 09, with revenues of around Rs 3700 crore and a net profit of about Rs 850 crore.

At Rs 879, the stock trades at a reasonable 13.3 times estimated FY 09 earnings. The much smaller Gateway Distriparks at Rs 110, trades at a more expensive 16.5 times forwards.

GMR Infra: Board a little later

The Rs 2,295 crore infrastructure player GMR, which runs the Hyderabad and Delhi airports, has seen its operating profit margins for the March 2008 quarter fall sharply by 510 basis points to 17.1 per cent.

That has been due to business development costs incurred at the Hyderabad airport and wage provisions made for employees at the Delhi airport. As a result the company's net profit, at Rs 50 crore, came in a tad below expectations.

Otherwise, with company's Vemagiri power plant in operation and the Delhi airport bringing in strong duty-free and advertising concessions, GMR's sales for the quarter were up at 43 per cent at Rs 885 crore.

The power division, which accounted for 70 per cent of GMR's consolidated revenues for the quarter, saw better plant loads at the Chennai unit .

There has been a slight delay in GMR's taking control of the Sabiha Gokcen airport, which GMR will be developing further.

This together with the delay in the levy of the user development fee for domestic passengers at the Hyderabad airport could impact GMR's revenues for the current year. GMR is expected to close FY09 with revenues of over Rs 4000 crore and a net profit of around Rs 425 crore.

The stock has lost about 42 per cent since the start of 2008 mainly because the street is waiting for a decision on the how exactly funds will be raised for the development of the 45 acre hospitality district at the Delhi airport.

An earlier proposal to accept a deposit of Rs 2800 crore, rather than higher lease rentals from prospective users""-a structure which would have helped GMR because the company could have used the money to make investments""has not been accepted.

While GMR is a good play on the India infrastructure story, at Rs 135, the stock trades at 54 times estimated consolidated FY09 earnings of Rs 2.25 and is still expensive.