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Tuesday, April 7, 2009

Container Corporation of India Ltd:-A rock solid bet

Scripscan:Container Corporation of India Ltd
Traded in:Nse-bse

Story:Container Corporation of India, better known as Concor, is a subsidiary of the ministry of railways. It is the only major player in India involved in moving containerised cargo via railways. At present, containerised cargo accounts for less than 20% of the total cargo traffic in India, compared to 70-80 % in developed countries.This is where opportunity lies for Concor, as it is the only major player in a growing market characterised by huge entry barriers and economies of scale. The government has allowed private players to enter the containerised cargo segment, but given the capital-intensive nature of business, these players won’t pose a major threat to Concor. Hence, investors can consider the stock with a 2-3-year horizon.

BUSINESS:Concor provides multimodal logistics support for exportimport (exim) and domestic cargo. It aggregates non-bulk goods and moves them in containers on specific routes. It has a countrywide network of 58 container terminals. Such terminals are strategically located at ports like Tuticorin, Madras, Vizag, Balasore, Kolkata, Kochi, and Gandhidham. It also has terminals at major production and consumption centres across the country.Concor provides services like warehousing during transit of exports and imports, bonded warehousing enabling importers to defer duty payments and LCL (less than container load) consolidation. The company has divided its operations into two divisions — exim and domestic. Exim cargo accounts for a significant percentage of its revenue as the company has linked container freight stations (CFS) and inland container depots (ICDs) with major ports via rail. Concor has recently ventured into cold chain logistics , to take advantage of the boom in organised food retail.

GROWTH DRIVERS:The containerised cargo handled by Concor in the international segment has grown at 15% per annum from FY97-07 . Containerised traffic is expected to grow at 15-20 % till FY15, which is evident from the expansion plans with regard to container handling capacity of major ports. The government has permitted 14 private players to enter containerised transportation, but they are not expected to garner significant market share in the next 2-3 years.On the domestic front, trade of non-bulk cargo like manufacturing, consumer durable and retail products is expected to fuel the need for more containerisation. Moreover, rail transport is cheaper than road travel over long distances; hence containerised mode of transport is set to grow further.

Conclusion:The stock looks attractive at current levels, considering the growth potential in its domestic business, foray into cold chain logistics and reasonable valuations.

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