Company Shastra

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Container Corporation of India Ltd. (Concor) – The One-Stop Rail Logistics Solution in India

Concor’s 10 YEAR X-RAY*: Green (Very Good)

(* 10 YEAR X-RAY shows the financial performance of a company in the last 10 years.)

Concor, In Brief

Concor is India’s lowest-cost service provider in the Rail Container Segment, with a 90% market share. The Government of India has a 63% stake in the company. Concor provides inland transport by rail for containers. It also provides multi-modal logistics services for Exim (Import-Export) & Domestic Trade. It has the largest infrastructure network – 59 container terminals (50 Exim + 9 Domestic) and 225 rakes. It is the one-stop rail logistics solution company in India.–

What does Concor’s Past Say?

Conor performed robustly in the last 10 years. It is only in the last 2 years, that its Net Sales & EPS growth rates have slowed down due to the global economic recession. Hence, the 10 YEAR X-RAY of Container Corporation of India is Green (Very Good)

What is Concor’s Short Term Outlook?

• Flat Performance in the last 4 quarters due to subdued sales from the High-Margin Exim Segment, somewhat compensated by the Growth in Domestic Traffic
• Imports on recovery track, but exports are still lagging behind
• The imbalance between exports & imports has led to running of empty trains. This has resulted in reduced margins as the company is finding it difficult to pass on this increased cost to importers
• Concor plans to spend Rs. 5 bn. in FY11, to add wagons and set up logistics parks. The capex will be funded through internal accruals
• Against Concor expections to end FY10 with a flat or marginal rise in profit, it reported a marginal drop in profits. The sales growth at 8% was as per expectations. (Unaudited)
• It is expected that it will register similar growth rates in the next few quarters. The Company has estimated a 5-6% rise in profit and a 8-9% growth in sales for FY11
• Hence, we can expect the short term future of Concor to be Red (Not Good)

What is Concor’s Long Term Outlook?

Growth Drivers:

• Market leader with a 90% market share in a growing industry
• Characteristics like capital intensity, high initial license fees, support from the Government, improved railways infrastructure & Concor’s superior infrastructure will help Concor sustain its position as a market leader
• The expected growth in India’s international trade will be a revenue driver. Domestic market is a great area of opportunity for Concor. Compared to penetration levels of 70-80% in developed countries, India’s domestic container transport accounts for only 20%
• High-Margin EXIM Segment is a revenue driver
• It is a single-window facility, coordinating with all the different agencies and services involved in the containerized cargo trade. Concor offers a high degree of customization, designed to provide the most cost-effective combination of road and rail

Concerns:

Concor’s real competition is Road Transport which has a 70% share of the total freight. However, over long distances,  rail containerized transport works out cheaper than road. Concor’s ability to manage the end-to-end logistics costs will decide whether it maintains or grows its market share, or loses share to road transport. Towards this, Concor will rely heavily on The Indian Railways

The 15 private players (2009) with a total market share of 10% pose a threat to Concor. We can expect that Concor will lose another 10-15% share in the next few years

Looking at all of the above, we can expect that Concor will grow with the growth in India’s international trade and earn a share of the domestic container freight also.  Its investments in infrastructure could ensure that it maintains its position vis-a-vis road transport. However, it will also start facing pressure from private players. Hence, we can expect the long term future prospects to be Orange (Somewhat Good)

Conclusion

Concor is in a position to safeguard its position as a market leader. Factors like superior infrastructure network, expected growth in the High-Margin Exim Segment and Government support will help it sustain its position in the future. It faces the threat of losing share to road transport & private players. Concor’s ability to repeat its past performance will depend on its strength & strategies to fight competition in the future

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