With exports and imports losing pace, the company is moving less cargo.
Merchandise exports fell a steep 16 per cent y-o-y in January this year, the fourth consecutive month that exports fell while imports slid by just over 18 per cent. With news on the trade front not too encouraging, Container Corporation’s volumes in the export-import (ex-im) transport segment could continue to be under pressure.
Already, exim volumes, which account for the bulk of the firm’s business, came off by 11.4 per cent in the December 2008 quarter. Cargo movement within the country too is turning somewhat sluggish — Concor’s domestic volumes came off by just under 6 per cent in the December 2008 quarter with some of its main customers such as Indo Rama Synthetics not bringing in much business.
That’s why despite better realisations, the company is staring at an increase in revenues in 2008-09 of below 5 per cent over the Rs 3,347 crore reported in 2007-08. In the nine months to December 2008, revenues have risen by just 5 per cent while net profits have grown by 14 per cent y-o-y. That would clearly upset the trend of the past three years when Concor posted a compounded growth in net sales of 20 per cent. As for 2009-10, as of now analysts are pencilling in a 10 per cent rise in revenues given that it would be coming off a low base.
While the firm’s operating profit margins expanded by 160 basis points y-o-y to 28.8 per cent in the December 2008 quarter, mainly due to better operating efficiencies, it may not be easy to sustain these margins on smaller volumes.
As a result, net profits for 2009-10, they reckon could increase at around the same pace as revenues. If that is so then the stock, at the current price of Rs 667, is valued at close to 10 times estimated earnings for 2009-10, making it a tad expensive given that the outlook for trade is somewhat hazy. The stock has outperformed the market over the past one year losing 22 per cent to the Sensex’s 48 per cent.
