Container Corporation of India: On high ground

15 October 2012

Initiating Coverage | Sector: Logistics

Container Corporation of India

BSE SENSEX

S&P CNX

18,793

5,705

CMP: INR1,048

On high ground

TP: INR1,250

Buy

Key beneficiary of GoI’s thrust on Indian Railways to correct freight modal

mix / key reforms; competition unable to mimic success

Bloomberg

Equity Shares (m)

1,6,12 Rel. Perf. (%)

M.Cap. (INR b)

M.Cap. (USD b)

CCRI IN

130.0

3/0/-7

130.9

2.5



52-Week Range (INR) 1,057/805

Valuation summary (INR b)

Y/E March

2012 2013E 2014E

Sales

41.0 44.5 49.9

EBITDA

10.2 11.3 13.0

8.7

9.4 10.0

EPS (INR)

66.6 72.4 77.0

EPS Gr. (%)

-1.2

8.7

6.3

BV/Sh. (INR) 427.4 480.0 536.1

P/E (x)

14.0 12.9 12.1

P/BV (x)

2.2

1.9

1.7

EV/EBITDA (x) 10.6 10.1

8.8

EV/Sales (x)

2.7

2.6

2.3

RoE (%)

16.5 16.0 15.1

RoCE (%)

22.3 21.0 20.0

Prices as on 11 October 2012

Over FY13-17, CCRI would be a big beneficiary of (1) the government’s focus on Indian

Railways to correct freight transport modal mix, (2) infrastructure projects like the DFC

and container port capacity expansions, and (3) key reforms such as GST and FDI in retail.

Since 2006, ~15 new players have entered the container train operation (CTO) business.

However, none of them have been able to mimic CCRI’s success.

By virtue of its legacy pan India strategic assets, CCRI enjoys an inimitable resource

advantage over its peers, which is steadily increasing with time.

While concerns such as high empties cost and muted near-term growth outlook remain,

the long-term prospects are favorable for CCRI and outweigh near-term concerns. We

initiate coverage with a Buy rating.

Set to further expand its inimitable moat

By virtue of its legacy low cost pan India strategic assets, Container Corporation

of India (CCRI) enjoys an inimitable resource advantage over its peers, which is

steadily increasing with time. None of the 15-odd new players that have entered

since the container train operation (CTO) industry was opened in FY06 have even

achieved minimum economies of scale. CCRI is implementing preemptive capex

of INR62b, which will not only further enhance its competitive advantage, but

also allow it to position itself as a total logistics player.

Multiple medium-to-long-term triggers

CCRI is one of the best proxies to play multiple themes such as (1) infrastructure

thrust, especially investments aimed at correcting the freight transport modal

mix, (2) reforms – GST, FDI in Retail, and (3) ongoing structural trends –

containerization, shift from road to rail. Successful execution of proposed

infrastructure capex and key reforms could result in container rail traffic growing

at 17.6% over FY13-18. As the undisputed leader, CCRI should benefit the most.

We expect CCRI’s volumes to grow at a CAGR of 17.1% over FY13-18.

Shareholding pattern (%)

As on

Jun-12 Mar-12 Jun-11

Promoter 63.09

63.09 63.09

Dom. Inst 7.09

7.31

7.24

Foreign

25.55

25.65 26.51

Others

4.28

3.96

3.16

Stock performance (1 year)

Leveraging strategic JVs to provide total logistics services

CCRI’s key strength is its ability to provide single window facility for multimodal

logistics services. It is able to do so through its strategic JVs with its customers

(GDL/Allcargo), port operators (APM/ DPI), road haulers (TCI), air cargo (HALCON/

GVK) and shipping lines (Maersk).

Initiating coverage with Buy

We believe CCRI’s inimitable pan India network provides it with a significant

moat, which coupled with positive long-term industry prospects, will allow it to

enjoy a prolonged period of growth. We believe DCF is the best way to capture

the intrinsic value of CCRI, given its stable cash flow, consistent payout ratio,

robust operational RoCE and low reinvestment requirements. Initiate coverage

with a

Buy

rating and a target price of INR1,250 (upside of 19.3%).

Investors are advised to refer

through disclosures made at the end

of the Research Report.

15 October 2012

Container Corporation of India

Story in charts Key beneficiary of thrust to correct freight modal mix



Unfavorable transport modal mix with high reliance

on roadways hinders India's GDP growth by ~2%.



The share of container trade is steadily

increasing, but is still significantly lower than

world average



There is now a concentrated effort to correct this

imbalance, which is reflected in the sharp increase

in allocation for the transport sector in the

successive five-year plans.



Concentrated effort to correct India's modal mix (%)

Rail transport is cheaper over longer

distances (cost)



The share of Indian Railways in container traffic

will increase sharply post the implementation of

the Dedicated Freight Corridor.

Air

Water

Rail

Air

Water

Rail

Air

Water

Rail

Road

(Kilometers)

FY10

From current

trajectory…

… to balanced

modal mix

Source: KPMG, McKinsey, IPA, MOSL



Proposed allocation for infrastructure/ transport sector in the 12th Plan to help correct freight modal mix

Twelfth

Planned expenditure on transport

infrastructure is expected to be about

INR13,750b. Assuming the split

remains similar to the 11th Five-year

Plan, it would amount to INR7,013b in

roads, INR4,813b in railways, INR963b

in ports and INR963b in airports

Source: Indian Planning Commission, KPMG



Share of container trade steadily increasing (%)



Share of Indian Railways in container traffic low

Source: IPA, IR, MOSL

15 October 2012

Container Corporation of India

Story in charts CCRI best placed to benefit from emerging opportunities



Since 2006, ~15 new players have entered the CTO

business. However, none of them have been able

to mimic CCRI's success.



Core RoCE would be under some pressure due to

major preemptive capex, but should bottom FY15.



Over FY02-12, its OCF and FCF have grown at a

CAGR of 12% and 17%. Post the completion of its

preemptive capex by FY16-17, we expect CCRI to

enter a sweet spot of sustainable and robust FCF,

which should lead to sharp improvement in its

payout ratio.



Over FY13-17 CCRI is undertaking preemptive

capex of ~INR62b over FY13-17, which is aimed at

increasing its competitive advantage in the CTO

industry and establishing itself as a total

multimodal logistics player.



Competitors unable to mimic CCRI's success

Rakes Terminals

(Nos.)

Volumes (m TEU’s)

Total

EXIM Domestic (m TEU’s)

Value

(INR b)

EBIT

(INR b)

9.3

0.3

0.4

1.2

11.3

EBIT Capital Emp

(%)

(INR b)

22.9

7.7

16.4

11.7

19.4

RoC

(%)

Concor

253

2.1

0.5

2.6

Gateway Rail*

0.2

0.0

0.2

Arshiya International**

0.1

Others

0.5

0.0

0.6

Total

387

Concor's Share (%)

# Net of cash, *Faridabad to start in 3QFY13, **Khurja to start in 3QFY13

28.6#

6.9

6.8

24.3

66.6

Source: Company, MOSL



Preemptive capex plans for FY13 and FY13-17 to further increase its competitive moat (INR b)

FY13

FY13-17

Source: Company, MOSL



Core RoCE to bottom in FY15



FCF to increase sharply from FY16

Source: Company, MOSL

15 October 2012

Container Corporation of India

Set to further expand its inimitable moat

Competitive intensity abating; emerging as a total logistics player



By virtue of its legacy low cost pan India strategic assets, CCRI enjoys an inimitable resource

advantage over its peers, which is steadily increasing with time.

None of the 15-odd new players that have entered since the container train operation

(CTO) industry was opened in FY06 have even achieved minimum economies of scale.

CCRI is implementing preemptive capex of INR62b, which will not only further enhance its

competitive advantage, but also allow it to position itself as a total logistics player.

Enjoys inimitable resource advantages

Incorporated in 1988 as a state-owned entity under the Ministry of Railways, CCRI had

the benefit of obtaining Indian Railways’ surplus land at strategic locations at very

attractive long-term lease rates. Till 2006, when private operators were permitted

and licensed to enter the container rail business, it was the monopoly player. CCRI’s

first mover advantage and legacy low cost strategic rail assets give it inimitable

resource advantages over its peers, which are steadily increasing with time.

Key success factors for a container train operator (CTO)



Extensive pan India asset network of rail terminals / container freight stations

(CFSs) / inland container depots (ICDs) at strategic trade locations



Relationships with major international shipping lines



Ability to offer multi-modal services

Has the largest rail terminal network in India

The nature of the CTO

business is such that

higher volumes can be

captured only if a player

has access to a wide

network to handle and

consolidate freight

The nature of the CTO business is such that higher volumes can be captured only if a

player has access to a wide network to handle and consolidate freight. CCRI has ~63

rail terminals at strategic locations across the country. Of these, 18 are pure EXIM

terminals, 33 are combined terminals and 12 are pure domestic terminals. Rail terminal

yards allow consolidation of cargo and enable implementation of the hub and spoke

model. They also enable value addition and drive cost efficiencies.

Setting up a rail terminal is not only capex intensive but also involves the arduous

task of (a) acquiring large contiguous land in close proximity to the railway track for

inland container depots (ICDs) and near ports for container freight stations (CFSs),

and (b) procuring regulatory approvals from the central government and linkages

from Indian Railways. Even six years after 15 private CTOs entered the business, they

have cumulatively set up only ~7 terminals.

Though its competitors have added ~134 rakes, ~55% of CCRI's rake capacity of ~253

rakes, they have failed to capture a proportionate share of volumes or industry profits.

Thus, they have been unable to mimic CCRI's financial success. While there are two

key terminals in the NCR region by GDL (at Faridabad) / Arshiya (at Khurja), that are

slated to get operational by 3QFY13 and another 12-15 terminals at planning/

implementation stage by various other CTO players, none of the competitors are

likely to have the network presence to pose any major challenge to CCRI's dominance

in the medium term.

15 October 2012

Container Corporation of India

CTOs in India - a snapshot

Name

Adani Logistics

Concor

CRRS*

CWC

ETA Star Group

Gateway Rail

Freight

Hind Terminals

Group

Adani

IR#

DPW

PSU

Dubai

GDL

MSC

Rakes

253

Rail

Terminals

Exim Domestic Locations

(%)

100

Gurgaon/

Kishangarh

Pan India

Other Activities

Ports, Container terminals,

CTO, CFS

Multi modal operator

Ports, Container terminal

Warehousing, CFS

Shipping and port services

CFS, CTO

Shipping/ Freight Forwarding

Container shipping, infra

CFS, container terminal

Container terminal, CFS,

Trucking

Fertilizers

Ludhiana/ Mumbai/

Faridabad

India Infra.

APL

SICAL Logistics

Boxtrans (India)**

JM Baxi & Co.

TransRail Logistics -

Arshiya Rail Infra.

KRIL

Inlogistics

NOL, Singapore

Total

387

Concor Share (%)

*Container RAIL Road Services; **Boxtrans (India) Logistics

100

95 Khurja

Services, #IR: Indian Railway

Source: Industry, MOSL

Favorably placed with respect to power centers in the industry

The importer or exporter typically appoints a shipping company (like Maersk,

Mediterranean Shipping, etc) or a third-party logistics provider (3PL), which in turn

engages ancillary service providers such as CTOs. The hypothetical cost break-up of a

typical container movement between India and US is: ocean freight 58%, destination

delivery 15%, surcharges and taxes 15%, and others ~12%. The CTO accounts for a

small proportion of an exporter/importer’s overall logistics costs.

The three key power centers in the CTO value chain are: (1) international shipping

lines/alliances, (2) Indian Railways, and (3) pan India rail terminal network owners.

Unless, a player has some inimitable advantage with respect to one or more of these

power centers, it is likely to get squeezed and fail to appropriate the value created on

a sustained basis.

According to industry

estimates, ~75% of the

global cargo capacity is

controlled by 12-15

international shipping

lines/alliances

1. International shipping lines/alliances:

According to industry estimates, ~75% of

the global cargo capacity is controlled by 12-15 international shipping lines/

alliances. They use their power to squeeze counterparty prices, switch between

rail/road, etc. Unless a CTO has a wide network and large scale, it will be unable to

capture the EXIM business, which constitutes ~75% of the CTO market and is

significantly more profitable.

2. Indian Railways:

Indian Railways is the sole owner of the rail network and the sole

haulage service provider in India. Since 2006, when private sector companies were

allowed to enter the CTO industry, Indian Railways has increased haulage charges

by ~23%. Haulage charges constitute 70-75% of a CTO’s overall costs and unless a

player has reasonable pricing power, it will not be in a position to pass through

the frequent increases in haulage charges.

15 October 2012

Container Corporation of India

3. Pan India rail terminal network owners:

A pan India rail terminal network owner

like CCRI is able to (1) withstand the bargaining power of international shipping

lines/alliances, and (2) pass through the increases in Indian Railways’ haulage

charges. This allows it to retain the value created on a sustainable basis and enjoy

attractive returns on its capital employed.

Understanding the CTO value chain

Sourcing & Intermediation

Exporter /

Producer

Outbound Cargo Handling

& Domestic Receipt

Air Cargo Centre

Central Warehouse

ICD

(Container Cargo)

CFS

(Container Cargo)

Customs House

Agent

Outgoing Port

Shipping Line

Legend:

Transport Mode:

Road

Rail

Air

Sea

Intermediary Type:

Service Providers

Infrastructure Points

End Users

Source: KPMG Analytics

Transit Airport

Local Warehouse

/ Pick Up Point

Consumer

Bulk / Break

Bulk Cargo

Inbound Cargo Handling

& International Receipt

International

Airport

Central

Warehouse

Customs House

Agent

CFS / ICD

Importer

Local Warehouse

/ Pick up point

Express Cargo Agent

Freight Forwarder

Local

Factory

Yard /

Storage

Trucking Company

3PL / 4PL Agent

Key Activities:



Sourcing and

Intermediation



LTL / FTL

Management



NVOCC

Management



Arranging /

Broking



Tracking (GPS / IT)



Insurance

Key Activities:



Unloading



Inspection



Sorting



Storage



Consolidating /

Bulk Breaking



Stuffing / De-

stuffing



Customs Handling

/ Clearing



Documentation



Incoming Port

In a position to play the game strategically

The MES (volume)

needed to break even are

high, given that the

product is homogeneous

and demand exogenous

Setting up rail terminals is capital intensive. The minimum economies of scale

(volume) needed to break even are high, given that the product is homogeneous and

demand exogenous. Success primarily depends on achieving economies of scale,

operational excellence and low cost advantage (establishment cost for CCRI is just 2%

of sales). The size of most sub-markets is limited and setting up a terminal close to an

existing one divides the traffic. Since there is limited scope to create variance in

service offerings, there is risk of price-based competition, which lowers RoCE and

increases the gestation period. By virtue of its first mover and low cost resource

advantages, CCRI is in a position to play the game strategically.

15 October 2012

Container Corporation of India

Competition unable to mimic CCRI's success

Since 2006, when private operators were permitted into the CTO business, ~15 new

players have entered. These players were largely attracted by: (1) robust financials of

the incumbent (PAT margin of 20%; operational RoCE of ~40%), (2) growth potential of

the CTO industry, (3) confidence in their ability to create variance in service offerings,

and (4) underestimation of minimum economies of scale.

Most of these players have been unable to mimic CCRI’s success and have been forced

to curtail their expansion plans. This is because of a confluence of factors such as: (1)

shrinking EXIM business due to global economic turmoil, (2) poor economic returns

on capital employed, (3) difficulty in land acquisition for setting up rail terminals, and

(4) contraction of domestic market growth (trade shift to roadways) due to sharp

~22% increase in haulage charges by Indian Railways.

Comparative performance of key players

Rakes Terminals

(Nos.)

Volumes (m TEU’s)

Total

EXIM Domestic (m TEU’s)

2.1

0.2

0.5

Khurja to

0.5

2.6

0.0

0.2

0.1

0.0

0.6

start in 3QFY13

Value

(INR b)

EBIT

(INR b)

9.3

0.3

0.4

1.2

11.3

EBIT Capital Emp

(%)

(INR b)

22.9

7.7

16.4

11.7

19.4

RoC

(%)

Concor

253

Gateway Rail*

Arshiya International**

Others

Total

387

Concor's Share (%)

# Net of cash, *Faridabad to start in 3QFY13, **

28.6#

6.9

6.8

24.3

66.6

Source: Company, MOSL

Initially, most of these players were able to expand the market by entering new and

under-serviced routes and concentrating on the neglected domestic market. Almost

10 of these players had initially tied up with CCRI to use its rail terminal network, with

few non-compete clauses. Faced with intense competition, CCRI took several strategic

measures to protect its market share: (a) reduction in tariffs for FEU (forty foot

equivalent unit) containers, (b) reduction in rates on selected routes, (c) introduction

of incentive schemes (volume discounts, bulk discounts, rebates, lower rates for

moving empty containers, and longer free time for clearing loaded containers), and

(d) strategic JVs to provide end-to-end logistics solutions. Since FY11, CCRI’s market

share has stabilized at ~75%.

Most of the

new entrants are not

making reasonable

returns on capital

employed and a few are

highly leveraged

Most of the new entrants are not making reasonable returns on capital employed and

a few are highly leveraged. Though one of the reasons for the low returns is the fact

that investments are front loaded, nevertheless, since competitors still far away from

reaching MES, the returns are likely to remain under pressure in the medium term.

On the other hand, the financial situation of CCRI remains robust (net cash of INR30b

+ operating cash flow of INR10b). As such, the competition does not pose a major

challenge to CCRI in the near term. While its competitors plan to cumulatively add

~18-20 rakes in FY13, CCRI alone intends to induct ~30 rakes during the year.

15 October 2012

Container Corporation of India

Volume comparison over FY07-12 (Industry v/s CCRI)

FY07

Indian Railways (m tons)

EXIM

Domestic

Total

% Change

EXIM

Domestic

Total

Concor (m TEU's)

EXIM

Domestic

Total

% Change

EXIM

Domestic

Total

Container Traffic by Ports

Railway Share of EXIM (%)

FY08

FY9

FY10

FY11

FY12

CAGR (%)

(FY07-12)

10.9

26.0

13.6

CAGR

(FY10-12)

7.3

-2.2

4.8

17.4

2.9

20.3

17.4

3.7

21.1

-0.1

28.9

4.1

23.3

7.1

30.3

33.9

88.5

43.6

1.9

0.5

2.3

-6.2

-3.6

-5.7

105

25.3

9.6

35.0

8.7

36.6

15.2

1.9

0.5

2.4

1.5

18.9

4.9

116

26.6

11.0

37.6

4.9

14.3

7.6

2.0

0.5

2.6

29.1

9.2

38.4

9.6

-16.4

2.0

2.1

0.5

2.6

1.7

0.4

2.1

1.9

0.5

2.5

15.3

20.7

16.3

103

4.5

3.7

4.3

6.5

-6.8

3.7

7.2

5.8

0.9

-13.9

5.8

1.6

132

142

11.1

10.6

Source: Company, MOSL, Indian Railways

CCRI EXIM growth has stabalized (YoY)

Domestic growth under pressure (YoY)

Source: Company, MOSL

Competitive intensity declining

CCRI’s market share has declined from 85% in FY08 to ~74% in 1QFY13. However, only

2-3 players (like GDL, Arshiya and Boxtrans) have been able to achieve any credible

scale and none of the new entrants have achieved minimum economies of scale.

Also, the incremental loss of market share for CCRI (gap between growth rates for

industry and CCRI) has reduced sharply over FY11-12. We expect this trend to sustain

and CCRI’s market share to become more resilient with competitive intensity abating.



New entrants seem to have underestimated minimum economies of scale:

The

new entrants seem to have underestimated minimum economies of scale. Based

on our industry interaction, we estimate the minimum economies of scale at ~45

rakes and 6-7 terminals spread across the country, with a high concentration in

the North-West. This implies minimum investment of ~INR13b (terminals: INR1.2b-

1.5b each and rakes: INR120m each).

The new entrants

seem to have

underestimated MES

15 October 2012

Container Corporation of India



CCI ruling brings increased clarity:

The recent ruling by Competition Commission

of India (CCI) on a case between Arshiya International and CCRI has increased

clarity on the rights of private players to use its rail infrastructure. Arshiya had

moved the Commission alleging that Indian Railways and CCRI work as a group

and indulge in exclusionary price discrimination and unfair trade practices. The

Commission ruled that there was no abuse of dominant position by the two

entities. However, it admonished Indian Railways for frequently changing its

haulage charges.

Emerging as a total logistics player

A multi-modal (sea, rail,

air, etc) service provider

has an edge over a

standalone operator

CCRI is implementing a preemptive capex of INR62b, which will not only further

enhance its inimitable competitive advantage, but also allow it to position itself as a

total logistics player. A multi-modal (sea, rail, air, etc) service provider has an edge

over a standalone operator. CCRI aims to provide a unique value proposition by offering

a multi-modal single window facility, coordinating with various agencies and services

involved in the containerized cargo trade. These include customers, gateway port,

railways, road haulers, consolidators, forwarders, custom house agents and shipping

lines. To achieve a high degree of customization, CCRI plans to offer packages designed

to provide the most cost effective combination.

Planned MMLP’s



Setting up 12 MMLPs across the proposed DFC alignment

CCRI is at an advanced stage to finalize INR7b-8b of land acquisitions in FY13 for

setting up 12 multimodal logistics parks (MMLPs) at strategic points across the proposed

Dedicated Freight Corridor (DFC) alignment. A multimodal logistics park (MMLP) is a

centralized place for all types of transportation activities and value-added services

required by exporters and local traders for shipment of goods. It also works as an

interlinking point for all modes of transport at one specific place. MMLP's would open

up several new business opportunities for CCRI in areas such as PFT/ SFTO, which is

currently not being captured in our estimates, due to lack of details.

New growth opportunities for CCRI

SCM/ 3PL

New

Opportunities

Cold Chain

(agriculture products)

Source: Company, MOSL

Khodiyar, Ahmedabad

Khatuwas, Rajasthan

Jharsuguda, Odisha

Quila Raipur, Punjab

Sriperumbuthur, Chennai

Kalinganagar, Odisha

Budhapank, Odisha

Pantnagar & Haridwar,

Uttarakhand

Visakhapatnam, AP

Krishnapatnam, AP

Palanpur, Gujarat



PFT/ Bulk Cargo

Air/ Ocean Freight

15 October 2012

Container Corporation of India

Industry background

Size of the industry

The size of India’s rail container transport operation (CTO) industry is ~38m tons in

volume terms and ~INR58b in value terms.

Industry segmentation

The CTO industry can be divided into two segments – EXIM and domestic. The

EXIM segment accounts for ~75% of the market while the domestic segment

accounts for ~25% of the market.



EBIT margins in the EXIM segment are high at 21-25% compared with 9-12% in the

domestic segment. The key reasons for this variance are: (1) the EXIM segment

enjoys higher terminal handling revenue due to customs, clearance, etc, (2) the

EXIM trade has more balanced up and down loads, leading to lower empties cost,

and (3) turnaround time for the domestic segment is high.



The north western part of India accounts for ~70% of the EXIM trade, with JNPT

alone handling ~41% of the container port traffic.



The traffic-handling capacity of major ports has increased at a CAGR of 13.4% from

504.7m tons in FY07 to 947m tons in FY12. During this period, most major ports

operated at a capacity of over 90%.



Liberalization of the industry

To carry out these

services effectively, it

was provided with land

by Indian Railways at

strategic locations where

trade originates

The domestic CTO industry was first liberalized in 1988, when Indian Railways

carved out its CTO operations, leading to the creation of Container Corporation of

India (CCRI). CCRI was established with the objective of facilitating primarily EXIM

container movement and providing other logistics services like one-window

customs clearing, ICD/CFS, etc. To carry out these services effectively, it was

provided with land by Indian Railways at strategic locations where trade originates.



On 5 January 2006, private sector companies were permitted to enter the industry,

with a view to attract a greater share of container traffic for Indian Railways and to

introduce competition in rail freight services. Indian Railways remains the sole

owner of the rail network and the sole haulage service provider in India.



Since 2006, ~15 new players (13 private and two state-owned) have entered the

industry. To satisfy the requirement of access to terminals, 10 of the 15 new CTOs

initially signed MoUs with CCRI.



The new CTOs were able to compete with CCRI, a monopoly service provider for

nearly 17 years, by offering value-added services. CCRI’s market share declined

from 85% in FY08 to ~75% in FY12.



Indian Logistics industry structure

Indian Logistics Market

Container Logistics

Market

Road Freight

Express Logistics

Liquid Logistics

CTO

ICD/ CFS

MTO

Source: Industry/MOSL

15 October 2012

Container Corporation of India

Industry structure: Homogeneous oligopoly market

Homogeneous Oligopoly Market

Top 4 players control >80% of the market

Nature of demand



Product homogenous



Demand exogenous

Nature of firm interaction



High interdependence

amongst firms



Oligopolies can retain

abnormal profits in the

long

run,

because

barriers to entry prevent

sideline firms from

entering market to

capture excess profits

Potential to differentiate



Firms sell similar goods

and services, which are

close substitutes and,

thus, price sensitive.



Ability to create service

variance limited



Coordination in industry

capacity so as to avoid

gluts

Competitive analysis for the CTO industry

Buyer Power - High



Buyers consolidated



Availability of possible

substitutes increases buyer

power



Switching cost low for buyers

Entry Barriers - High



Minimum economies of scale

(MES) high



High exit barriers due to high

capex intensity



Regulatory requirements



Access to favorable locations

Supplier Power - Medium



Multiple wagon

manufacturers



Many competing suppliers -

products standardized

Willingness to Pay

Value received by

customer

Substitutes - High



Alternatives to

railways exist, e.g.

road transport,

particularly for

shorter distances

Price

Value received by

firms in the industry

Cost

Value received

by supplier

Opportunity Cost

Rivalry amongst firms - High

Given homogenous product and exogenous demand,

competition is price based. Firms need to rely on operational

excellence and low cost advantage to distinguish themselves

and retain high returns. If competitors are weak, the market

could witness 'winner takes it all' kind of stuation.

Source: Company, MOSL

15 October 2012

Container Corporation of India

Container Traffic Growth with GDP

EXIM with Container Traffic Growth

FY02-12 CAGR - 23.7%

FY02-12 CAGR - 14%

Container Traffic vs Port Traffic (%)

Container Traffic vs Concor Exim Traffic (%)

FY02-12

CAGR - 9.4%

FY02-12

CAGR - 9.0%

India Export Break-up

India Import Break-up

Major vs Non Major share (%)

Port traffic mix (MT)*

*Report of Working Group for Port Sector for the 12th five year plan, Ministry of Shipping

15 October 2012

Source: IPA, Company, MOSL

Container Corporation of India

Multiple medium-to-long-term triggers

Infrastructure thrust, reforms, structural trends



CCRI is one of the best proxies to play multiple themes such as (1) infrastructure thrust,

especially investments aimed at correcting the freight transport modal mix, (2) reforms –

GST, FDI in Retail, and (3) ongoing structural trends – containerization, shift from road to rail.

Successful execution of proposed infrastructure capex plans and implementation of key

reforms could result in container traffic increasing by 17.6% over FY13-18.

Given that CCRI is the undisputed leader in the industry, it should benefit the most. We

expect CCRI's volumes to grow at a CAGR of 17.1% over FY13-18.

Infrastructure thrust; sharp increase in allocation to transport

It is estimated that India’s

transportation and

logistics bottlenecks

hinder its GDP

growth by ~2%

It is estimated that India’s transportation and logistics bottlenecks hinder its GDP

growth by ~2%. This is primarily due to the fragmented nature of the industry,

infrastructure constraints across transport modes, and an unfavorable modal mix,

with very high reliance on roadways. There is now a concentrated effort to correct

this imbalance, which is reflected in the sharp increase in allocation for the transport

sector in the successive five-year plans.

Proposed allocation for infrastructure/ transport sector in the 12th Plan

Twelfth

Planned expenditure on

transport infrastructure

is expected to be about

INR13,750b. Assuming

the split remains similar

to the 11th Five-year

Plan, it would amount to

INR7,013b in roads,

INR4,813b in railways,

INR963b in ports and

INR963b in airports

100% = INR5,785b

Planned spend

on Transport

Infrastructure

100% = INR2,568b

Source: Indian Planning Commission, KPMG

Indian Railways’ Vision 2020 aims to correct the modal mix

Currently, traffic flows

where rail transport is

structurally cheaper than

road transport account

for around two-thirds of

the total traffic

The route network of Indian Railways has expanded very slowly. In 1947, Indian

Railways inherited 53,996km of rail network, which stood at ~64,099km, an increase

of 10,000km over 62 years (FY10). Indian Railways’ Vision 2020 proposes to add

25,000km of new lines by 2020, supported by government funding and increase in

PPP. While road transport is the least expensive for distances up to 400km, rail and

waterways are cheaper for longer distances. Currently, traffic flows where rail

transport is structurally cheaper than road transport account for around two-thirds

of the total traffic.

15 October 2012

Container Corporation of India

Category-wise modal share (%)

Rail transport is cheaper over longer distances (cost)

Concentrated effort to correct India's modal mix (%)

Air

Water

Rail

Road

Air

Water

Rail

Air

Water

Rail

(KM's)

FY10

From current

Trajectory…

… to balanced

modal mix

Source: KPMG, McKinsey, IPA, MOSL

The Dedicated Freight

Corridor (DFC) is one of

the largest infrastructure

projects undertaken by

the Indian Railways since

independence

Dedicated Freight Corridor (DFC) project to transform CTO

The Dedicated Freight Corridor (DFC) is one of the largest infrastructure projects

undertaken by the Indian Railways since independence. Dedicated Freight Corridor

Corporation of India (DFCCIL), a special purpose vehicle (SPV) set up under the

administrative control of the Ministry of Railways, is constructing two corridors

spanning ~3,300km in the first phase – the Western DFC and the Eastern DFC. The

Eastern DFC, starting from Ludhiana in Punjab will pass through the states of Haryana,

Uttar Pradesh, Bihar, and terminate at Dankuni in West Bengal. The Western DFC will

traverse the distance from Dadri to Mumbai, passing through the states of Delhi,

Haryana, Rajasthan, Gujarat and Maharashtra.



Opening up of CTO industry in

2006 alone had led to

industry witnessing a 2.5x/

1.5x/ 1.6x volume growth in

the EXIM/ domestic/ total

segments, over FY08-10.

The Indian Railways’ quadrilateral linking the four metropolitan cities of Delhi,

Mumbai, Chennai and Kolkata, commonly known as the Golden Quadrilateral, and its

two diagonals (Delhi-Chennai and Mumbai-Howrah), adding up to a total route length

of 10,122km carries more than 55% of Indian Railways’ revenue-earning freight traffic.

The existing trunk routes of Howrah-Delhi on the Eastern Corridor and Mumbai-Delhi

on the Western Corridor are highly saturated, line capacity utilization varying between

115% and 150%. The surging power needs requiring heavy coal movement, booming

infrastructure construction and growing international trade has led to the conception

of the DFCs.

15 October 2012

Container Corporation of India

Objectives of DFC project

Reduce unit cost of transportation by

speeding up freight train operations

and higher productivity

Increase rail share in freight market by

providing customized logistic services

Segregate freight infrastructure for

focused approach on both passenger

and freight business of Railways

OBJECTIVES

Create additional rail infrastructure to

cater to high levels of transport demand

Introduction of high end technology and

IT packing of Freight Services

Introduction of time tabled freight

services and guaranteed transit time

Source: DFCCIL

DFCCIL envisages long haul operations, with trailing loads increasing from ~4,000 tons

to ~15,000 tons, carrying capacity increasing from 90 containers to 400 (by double

stacking), maximum speed from 75/kmph to 100/kmph and station spacing 7-10Km to

40Km. CTOs will be able to lower cost through increased efficiencies (higher asset

turnover and faster turnaround time) and become a reliable/preferred mode for longer

haul freight movement.

DFCs will increase efficiencies and lower cost for CTOs

Will increase asset

turnover and lower

turnaround time sharply

Source: DFCCIL

15 October 2012

Container Corporation of India

Update on DFC progress

We expect substantial part of the project awards to be completed in FY13/14. The

Western DFC is likely to be commissioned by FY16/17. We believe that the DFC project

will provide a ‘multiplier effect’ for India in many ways.

Phase-wise project details

Western Corridor

Phase I

Phase II

Phase III

Eastern Corridor

Phase I-APL1

Phase II-APL2

Phase III-APL3

Phase IV (Funding through PPP)

Phase Ia*

*Funding by Ministry of Railways

Year

Rewari- Vadodara (920 Kms)

Vadodara- JNPT(430Kms)

Rewari – Dadri(140 Kms)

Khurja - Kanpur (343 Kms)

Kanpur - Mughalsarai (390 Kms)

Khurja-Ludhiana (397 Kms)

Dankuni - Sonnagar (550 Kms)

Sonnagar - Mugal Sarai (125 Kms)

2009-2016

2010-2017

2009-2016

2010-2016

2011-2016

2010-2016

Source: Company, MOSL

Project cost and funding:

The total project cost is INR930b, including land cost of

INR70b. The net requirement for the DFC project is INR880b. Of this, INR100b of

Sonnagar-Dankuni (Eastern DFC) will be funded on PPP basis – IDC: INR60b; Bridges:

INR60b. Thus, DFCCIL requires funding of INR680b – debt of INR420b (JICA: INR280b

and WB: INR140b) and equity of INR260b.

Project awards to commence in FY13:

The final bids for project awards for the Western

DFC of 300-350km each are expected to be awarded by October 2012, while work is

expected to commence from 1QCY13. The signaling/electrical contract is likely to be

taken up for bidding by mid-FY14. For the Eastern DFC, bidding for 345km began in

2QFY13, with ~11 bidders being shortlisted.

Issues in terms of land

acquisition in Mumbai/

Thane and 10-12 villages

in Gujarat have also been

sorted out during 2QFY13

Land acquisition:

The Western DFC is being contemplated in three phases: Vadodara

to Rewari (920km), JNPT to Vadodara (430km), and Rewari to Dadri (140km). While

land acquisition for the Vadodara-Rewari section has been completed to the extent

of 83%, issues in terms of land acquisition in Mumbai/Thane and 10-12 villages in

Gujarat have also been sorted out during 2QFY13.

Western Dedicated Freight Corridor: Land acquisition status

Total Scope

kms Area (Ha)

274

1,064

359

958

196

907

558

122

930

3,608

202

460

118

239

108

612

141

942

569

2,252

1,499

5,860

20A

kms Area (Ha)

274

1,064

359

958

144

721

552

122

930

3,608

202

460

118

239

108

612

141

942

569

2252

1,499

5,860

kms

274

339

826

108

464

1,290

20E

Area (Ha)

1,064

924

459

412

3,205

148

446

307

1718

4,923

kms

274

339

776

108

143

919

20F

Area (Ha)

1,064

924

411

386

2,998

362

782

3,780

Progress Compensation (INR M)

(%)

Award

Disbursed

100.0

1,960

1,370

96.5

1,450

770

45.3

820

130

69.2

3,550

3,280

83.1

7,780

5,550

1.3

59.2

3,590

3,400

34.7

3,663

3,444

64.5

22,886

1,370

Jaipur

Ajmer

Ahmedabad

Vadodara

Dadri

Total Phase 1

Mumbai

Surat

Vadodara

Dadri

Total Phase 2

Grand Total

15 October 2012

Container Corporation of India

Key reforms that could revolutionize the logistics sector

The CTO industry could get a major fillip from few key reforms such as (1) the

implementation of GST, and (2) FDI in multi-brand retail. CCRI has strategically

positioned itself to capitalize on these opportunites once they become available.

As such, transport

requirement would shift

from shorter haul

‘warehouse to

warehouse’ to longer

haul ‘factory to factory’,

giving a boost to players

like CCRI

Implementation of GST:

The implementation of the Goods and Services Tax (GST)

could be a significant positive for the logistics industry, particularly for multimodal

players like CCRI. Currently, due to multiple and differential state-level taxes, most

companies are forced to set up multiple warehouses across the country, to minimize

inter-state movement and associated taxes. Implementation of the GST, which aims

at leveling these taxes, will obviate the need to have multiple warehouses.

Consequently, companies would be able to function effectively with fewer

strategically located warehouses across the country and adopt the hub and spoke

model to reduce inventory requirements and lower carrying cost. As such, transport

requirement would shift from shorter haul ‘warehouse to warehouse’ to longer haul

‘factory to factory’, giving a boost to players like CCRI that can effectively handle the

entire chain.

GST impact: Factory to factory transfer

Source: KPMG Analysis

FDI in multi-brand retail:

CCRI has been setting up cold chains to provide transportation

of perishable products from the source to the end user. Currently, only 10-15% of the

players in the cold storage business have such capabilities, primarily due to absence

of reefer container linkages and high power cost. CCRI has big plans to tap the

agriculture business opportunity through this route, for which it has constituted a

100% subsidiary, Fresh and Healthy Enterprises. Approval of FDI in retail is likely to

attract established MNC giants, who could potentially become captive customers for

CCRI.

15 October 2012

Container Corporation of India

Ongoing structural trends that portend well for CTOs

Ongoing structural trends towards increasing containerization and rail transport of

containers bode well for CTOs in general and CCRI in particular.

Structural move towards containerization

Currently, the share of container traffic in India is very low (~15% of total traffic) compared

to developed countries (~70% of traffic). Nonetheless, the share of container freight in

India has been steadily increasing over the years (10% in 2000 to ~15% in FY12). Container

traffic in India has grown at a CAGR of ~14.3% over FY02-12, compared to port traffic

growth of ~9.4%. Growth has been boosted by increasing contribution of non-major

ports from 28.4% in FY08 to 38% in FY12. Maritime Agenda 2020 estimates that container

trade in India would grow at a CAGR of 15% over FY10-20.



The need to aggregate

cargo, which is currently

moving piecemeal in bulk

form to ports for

containerization

The structural trend towards increased containerization in India is driven by:



The need to aggregate cargo, which is currently moving piecemeal in bulk form to

ports for containerization, aided by the development of new rail freight terminals/

ICDs/PFTs and logistics hubs, which would make it amenable to rail movement.



Economic development, leading to a shift in trade from raw materials to finished

goods, requiring containerization.



Removal of current infrastructure bottlenecks (ports in particular) and

development of other modes of transport (coastal shipping, etc).

Share of container trade steadily increasing

Growth of container freight

Source: IPA/MOSL

15 October 2012

Container Corporation of India

The share of

rail transport in overall

freight movement has

been declining steadily

from ~89% in FY51 to 53%

in FY87 to ~28% currently

Move towards ‘rail transport of containers’

The share of rail transport in overall freight movement has been declining steadily

from ~89% in FY51 to 53% in FY87 to ~28% currently. There has been little investment

in track infrastructure since independence. While route kilometers have grown at a

CAGR of just 3%, freight and passenger traffic has grown at a CAGR of ~52%. This has

led to most high density corridors becoming oversaturated, negatively impacting

CTO industry demand. Top seven key routes account for ~50% of the freight traffic in

India. Increasing share of non-major ports in container traffic and infrastructure

development around these ports should aid development of new routes and result

in lower pressure on existing high density traffic routes.



Key routes are congested, negatively impacting rail transport (%)

Top seven key routes

account for ~50% of the

freight traffic in India

Source: Industry, MOSL

The top-4 ports in India

currently account for

~87% of container

demand

CCRI key player across key EXIM markets

CCRI is the key player across key EXIM markets, with a lion’s share of the container

rail traffic across the four major ports of India. The top-4 ports in India currently

account for ~87% of container demand. JNPT alone accounts for 41% of the container

trade in India. New private ports such as Mundra and Pipavav are growing faster

than the major ports and have been steadily increasing their market share. CCRI has

been following the shift in trade and has steadily been increasing operations around

these new ports. Consequently, the share of volumes from JNPT has been steadily

declining for CCRI (~75% in FY08 to ~55% in 1QFY13).

Four ports account for bulk of container rail traffic

% container

handling as %

of total capacity

% of total

container

industry trade

% traffic

transported

by Rail

25-30

20-25

30-35

Total Rails

deployed

/Day

~20*

~10

Trains

deployed

by Concor

Export/

Import Mix

50% /50%

49% /51%

54% / 46%

50% /50%

Source: Company, MOSL

JNPT

Chennai

Mundra

Pipavav

Total

*27 trains possible

15 October 2012

Container Corporation of India

Share of JNPT in overall container traffic*

Share of Indian Railways in container traffic

*Report of Working Group for Port Sector for the 12th five year plan, Ministry of Shipping

Source: IPA, IR, MOSL

CCRI's EXIM distribution port-wise

FY11

FY12

Source: Company

Changes in haulage charges by Indian Railways for key categories (INR/ TEU for 1,000Km)

Oct-10

Notified List

Cement Bricks and stones

Pig Iron and sponge iron

Iron and steel

POL

Fly Ash

Fire Bricks/ rods

Coal/ Bitumen

Kerosene oil

Others outside notified list

Sugar/ Oil cakes

Foodgrains

23,174

27,809

30,897

Dec-10

23,973

28,757

31,962

19,179

20,778

27,168

287

17,580

20,778

Mar-11

23,547

15,240

28,257

31,395

18,837

20,409

26,685

28,257

18,837

19,623

% Change

-1.8

-1.7

-1.8

Apr-12

28,257

30,138

33,907

37,674

22,603

24,488

32,023

33,907

% Change

20.0

97.8

20.0

Trade re-alignment and

pressure on domestic rail

segment has resulted in

increasing empties cost

for CCRI, which stood at

INR1.8b in FY12,

empties cost in 1QFY13

stood at INR420m

7.2

15,240

-19.1

-5.6

15,240

-22.3

Source: Industry, Company, MOSL

15 October 2012

Container Corporation of India

Leveraging strategic JVs to provide total logistics services

Gaining an edge over standalone operators



CCRI's key strength is its ability to provide single window facility for multimodal logistics

services, by coordinating with various agencies and services involved in the containerized

cargo trade.

It is able to do so through its strategic JVs with its customers (GDL/Allcargo), port operators

(APM), road haulers (TCI), air cargo service providers (HALCON) and shipping lines (Maersk).

CCRI also has a fully-owned subsidiary engaged in cold chain management, through which

it aims to provide complete cold chain logistics solutions to organized retailers.

Strategic JVs across the CTO chain

CCRI has ~12 strategic JVs with leading MNCs like Maersk, DPI, APM, etc, and local

players like Gateway Rail, Allcargo, etc, across the value chain – from ports to terminals.

It leverages these JVs to provide total logistics services. The company could unlock

significant value from these ventures in the future.

CCRI has several strategic JVs with leading MNC and local players (INR m)

Particulars

Star Track Terminals

#Albatross Inland Ports

Gateway Terminals India

CMA-CGM Logistics Park*

Himalayan Terminals

Type

(%) Holding

Assets Liabilities

114

233

2,755

1,476

112

116

1,724

1,262

PBT

-1

-170

-2

-8

JV with Maersk India for CFS at Dadri, U.P.

JV with Transworld Group for CFS at Dadri, U.P.

JV with APM Terminals for third berth at JN Port, Mumbai

JV with Ameya Logistics for CFS at Dadri, UP

JV with Nepalese Ent & Transworld for management

and operation of rail CTO at Birgunj (Nepal)

HALCON

A arrangement with Hindustan Aeronautics for

operating air cargo complex & ICD at Ozar airport, Nasik

India Gateway Terminal

JV with Dubai Port Int. (DPI) for setting up and

managing Container Terminals at Cochin

Hind CONCOR Terminals*

JV with Hind Terminals for CFS at Dadri, U.P.

Infinite Logistics Solutions JV with TCI Ltd.to establish logistics freight terminals

and provide integrated logistics services

Container Gateway

JV with Gateway Rail for operations of existing rail/

road container terminal at Garhi Harsaru, Gurgaon

Allcargo Logistics Park

JV with Allcargo Global for setting up and running

CFS at Dadri

CONYK Cartrac

JV with NYK Auto Logistics for setting up &

dealing in CBU vehicle logistics

Total

*Dadri

-1

4,858

3,239

2,727

Source: Company, MOSL

Targeting the huge growth opportunity in cold chain industry

CCRI has a 100% subsidiary, Fresh and Healthy Enterprises (FHEL), which is engaged in

cold chain management. It aims to provide complete cold chain logistics solutions to

organized retailers. Its clients include Walmart, More, Big Bazzar, Mother Dairy, Big

Apple, etc. In FY12, FHEL procured 6,894m tons of apples, most of which were sold in

markets like Delhi, Chennai, Bangalore and Maharashtra. 80-90% of its off-season

sales were at fixed rates.

15 October 2012

Container Corporation of India

Almost 35% of the fruits

and vegetables produced

perish due to lack of cold

chain and distribution

infrastructure

Cold chain management in India offers huge growth opportunity. The fruit and

vegetable business in India is almost entirely in the unorganized sector and is worth

an estimated ~INR200b. Trade is carried on primarily on credit. Almost 35% of the

fruits and vegetables produced perish due to lack of cold chain and distribution

infrastructure. Farm sizes are small and farmers sell their produce at nearby markets/

mandis. Almost the entire chain is currently composed of unorganized players. The

introduction of GST will lead to increased requirement of total logistics solutions

such as 3PL/4PL, inventory /warehouse management, contract logistics services and

knowledge support services.

3PL at a nascent stage in India

The role of third-party logistics service (3PL) providers is at an early stage of evolution

in India. Unlike their global counterparts, Indian customers are yet to witness end-

to-end management of transport & logistics services by 3PLs. Growth of 3PLs will

increase demand for multimodal players like CCRI.

Penetration of 3PL in key countries

Source: KPMG, MOSL

15 October 2012

Container Corporation of India

Financials robust despite higher competition

Core RoCE at ~30%; to bottom out at ~22.7% in FY16



We expect CCRI’s revenue to grow at a CAGR of 11% and PAT to grow at a CAGR of ~8% over

FY12-15. Net margin should sustain at ~20%.

RoE is likely to remain subdued in the near term due to its high preemptive capex of

INR60b. We expect RoE to decline from 16.5% in FY12 to 14.9% in FY15.

We expect core RoCE, which is currently ~30%, to remain under pressure over the next ~4

years and bottom at ~22.7% in FY16.

Expect revenue CAGR of ~11% over FY12-15

We expect CCRI’s

revenue to grow at a

CAGR of 11% over FY12-15

from INR44.6b to

INR56.2b

We expect CCRI’s revenue to grow at a CAGR of 11% over FY12-15 from INR44.6b to

INR56.2b. This would be primarily led by the EXIM business and higher contribution

from other value-added segments. The revenue mix between EXIM and domestic is

likely to move from 82%:18% to 84%:16%.

Revenue and growth over FY12-15E

Source: Company, MOSL

EBIT margins to expand

We expect EBIT margins

in the EXIM business to

expand from 26.4% in

FY12 to 26.7% by FY15

Improvement in domestic segment, lower empties cost and operating efficiencies

result in EBIT margin expansion over FY12-15. We expect EBIT margins in the EXIM

business to expand from 26.4% in FY12 to 26.7% by FY15, while EBIT margins in the

domestic business are likely to expand from 8.4% in FY12 to 9.3% by FY15. Overall EBIT

margins are likely to expand from 21.2% in FY12 to 22.3% by FY15.

EBIT and EBIT margins over FY12-15E

Source: Company, MOSL

15 October 2012

Container Corporation of India

Expect PAT CAGR of ~8.3% over FY12-15

CCRI is undertaking

the capex to position

itself strategically for the

huge opportunity around

FY17-18

CCRI has historically maintained a net margin of ~20% due to its pricing power given

its dominant position in the industry. We do not see any major decline in CCRI’s

pricing power and expect this profitability to sustain. We model ~8.3% CAGR in net

profit over FY12-15. Given new investment would have a 2-3 year gestation period, in

the interim higher depreciation charge and lower other income would exert pressure

on the net profit growth. CCRI is undertaking the capex to position itself strategically

for the huge opportunity around FY17-18, when DFC gets completed. Industry experts

estimate that the completion of the DFC project would result in a jump of 1.7-2x in

CTO trade, with shortening of turnaround time, increased asset turnover due to double

stacking, and improved efficiencies.

Notwithstanding near-term pressure on net profit growth and RoCE due to the high

capex plans, we view this as a key positive, as the preemptive capex would (1) further

increase CCRI’s competitive advantage and allow it to capitalize on the large emerging

opportunity, and (2) correct CCRI’s capital structure by utilizing its surplus cash.

PAT growth to be subdued over FY12-15E (INR m)

Source: Company, MOSL

RoE to remain subdued in the near term due to high capex intensiy

CCRI’s RoE is

likely to remain subdued

in the near term due to

its high preemptive

capex of INR62b

CCRI’s RoE is likely to remain subdued in the near term due to its high preemptive

capex of INR62b. We expect RoE to decline from 16.5% in FY12 to 15.4% in FY15, and

asset turnover ratio to remain flat at 0.8x over FY12-15. The biggest gain for CCRI is

likely to be benefits with regard to asset turnover improvement. We expect CCRI’s

asset turnover to increase from 0.8x in FY12 to ~1.4x in FY18, while EBIT margins are

likely to improve from 21% in FY12 to ~24% by FY18, resulting in RoAE improving from

16.5% in FY12 to 20% in FY18.

RoE to remain under pressure in the near term

15 October 2012

Container Corporation of India

Core RoCE remains attractive

As at FY12, CCRI had

~INR27b cash (49% of

capital employed,

INR212/share)

As at FY12, CCRI had ~INR27b of cash (49% of capital employed, INR212/share), invested

primarily in fixed income securities, yielding low RoCE of ~9%. Consequently, CCRI’s

overall RoCE was just 16.2%. Its core RoCE, which has been under pressure post the

privatization of the CTO industry and has been steadily declining from 47% in FY08,

stood at 30.7% for FY12. We expect core RoCE to remain under pressure over the next

~4 years and bottom at ~23.7% in FY15, as the company is undertaking a major

preemptive capex of INR62b over FY13-17. DFC will enable CTO players to enjoy double

stacking of containers, while also reducing the turnaround time significantly. This will

allow companies to significantly increase their utilization rates, while also improving

their EBIT margins, implying sharp improvement in RoCE.

RoCE to bottom in FY16

Source: Company, MOSL

Preemptive capex of INR62b over FY13-17

CCRI is undertaking

preemptive capex of

~INR62b over FY13-17,

which is aimed at

increasing its

competitive advantage in

the CTO industry

CCRI is undertaking preemptive capex of ~INR62b over FY13-17, which is aimed at

increasing its competitive advantage in the CTO industry and establishing itself as a

total multimodal player. The break-up of the capex is as follows: ~INR20b for new

wagons, INR12b for land, INR5b for strategic JV's and INR20b for equipment and others.

For FY13 alone, it has capex plans of ~INR16.5b, which include ~INR7b in land for

setting up ~12 MMLPs, ~INR3.5b for wagons and ~INR5b for equipments. These

investment would open up several new business opportunities for CCRI in new areas,

which is currently not being captured in our estimates, due to lack of details.

Capex plans for FY13 and FY13-17 (INR b)

FY13

FY13-17

Source: Company, MOSL

15 October 2012

Container Corporation of India

Has steady and sustainable free cash flows

Over FY02-12, its OCF and

FCF have grown at a CAGR

of 12% and 17%,

respectively

CCRI is a debt-free company (net cash of INR27b as at March 2012) and enjoys steady

OCF and FCF. Over FY02-12, its OCF and FCF have grown at a CAGR of 12% and 17%,

respectively. This is against net profit CAGR of 13%, due to low reinvestment

requirements. It has historically maintained a dividend payout ratio of 25-30%. Despite

CCRI’s INR62b capex initiative over FY13-17, we expect it to maintain 24-25% payout

ratio during this period. Post the completion of its preemptive capex by FY16-17, we

expect CCRI to enter a sweet spot of sustainable and robust FCF, which should lead to

sharp improvement in its payout ratio.

OCF & FCF generation over FY06-FY15E

Dividend payout ratio has been stable between 25-30%, over FY06-FY15E

Post the completion of its

preemptive capex by

FY16-17, we expect CCRI

to enter a sweet spot of

sustainable and robust

FCF, which should lead to

sharp improvement in its

payout ratio

Source: Company, MOSL

15 October 2012

Container Corporation of India

Key Assumptions

FY08

EXIM

Volumes (m TEU)

% Change

Realization*

% Change

Value (INR b)

% Change

EBIT/ TEU

% Change

EBIT (INR b)

% Change

% of Sales

Domestic

Volumes (m TEU)

% Change

Realization*

% Change

Value (INR b)

% Change

EBIT/ TEU

% Change

EBIT (INR b)

% Change

% of Sales

Total

Volumes (m TEU)

% Change

Value (INR b)

% Change

Realization*

% Change

EBIT/ TEU

% Change

EBIT (INR b)

% Change

*Realization: INR/TEU

FY09

FY10

FY11

FY12

FY13E

FY14E

FY15E

CAGR

(FY12-15)

8.6

2.3

11.1

2.8

11.6

2.0

15.3

13,385

-6.1

26.5

8.2

3,694

-12.7

7.3

0.6

27.6

0.5

20.7

14,895

-2.0

7.0

18.3

2,032

-22.1

1.0

-6.0

13.6

2.4

16.3

10.2

13,675

-5.2

3,147

-16.9

7.7

-3.4

1.9

-6.2

14,693

9.8

27.3

3.0

4,360

18.0

8.1

10.7

29.7

0.5

-3.6

15,176

1.9

6.9

-1.8

2,104

3.5

1.0

-0.2

13.9

2.3

-5.7

2.0

14,788

8.1

3,498

11.2

8.1

4.8

1.9

1.5

15,399

4.8

29.0

6.3

4,017

-7.9

7.6

-6.5

26.1

0.5

18.9

14,977

-1.3

8.1

17.3

2,413

14.6

1.3

36.3

16.1

2.4

4.9

8.6

15,305

3.5

3,390

-3.1

8.2

1.7

2.0

7.2

14,820

-3.8

29.9

3.2

4,103

2.1

8.3

9.5

27.7

0.5

0.9

15,387

2.7

8.4

3.7

1,474

-38.9

0.8

-38.4

9.6

2.6

5.8

3.3

14,940

-2.4

3,383

-0.2

8.7

5.6

2.1

5.8

15,293

3.2

32.7

9.2

4,040

-1.5

8.6

4.2

26.4

0.5

-13.9

16,983

10.4

8.0

-4.9

1,420

-3.7

0.7

-17.1

8.4

2.6

1.6

6.1

15,597

4.4

3,307

-2.2

8.6

-0.6

2.3

6.5

15,645

2.3

35.6

8.9

4,068

0.7

9.3

7.2

26.0

0.5

10.0

17,238

1.5

8.9

11.7

1,465

3.2

0.8

13.5

8.5

2.8

7.1

9.5

15,939

2.2

3,367

1.8

9.4

9.1

2.5

9.5

16,005

2.3

39.9

12.0

4,257

4.7

10.6

14.6

26.6

0.6

11.2

17,583

2.0

10.1

13.4

1,618

10.4

0.9

22.8

9.2

3.1

9.8

12.3

16,300

2.3

3,583

6.4

11.0

16.9

2.7

9.8

16,357

2.2

44.7

12.2

4,384

3.0

12.0

13.1

26.8

0.6

12.0

17,899

1.8

11.5

14.0

1,665

2.9

1.1

15.3

9.3

11.1

1.8

13.0

5.5

17.1

3.4

9.0

10.2

11.4

12.6

16,650

2.2

2.1

3,720

4.0

3.8

12.6

13.4

14.4

Source: Company, MOSL

EXIM volumes (in m TEU and INR b)

Domestic volumes (in m TEU and INR b)

Source: Company, MOSL

15 October 2012

Container Corporation of India

EXIM Volumes (CAGR, %)

Historical

FY09-12

FY08-12

FY04-12

FY13-15

FY13-18

FY13-20

4.8

3.7

6.9

Estimates

8.6

13.3

15.5

EXIM Volumes over FY03-15

EXIM Value (CAGR, %)

Historical

FY09-12

FY08-12

FY04-12

FY13-15

FY13-18

FY13-20

6.2

3.6

12.2

Estimates

11.1

15.0

17.0

EXIM Value over FY03-15

Domestic Volumes (CAGR, %)

Historical

FY09-12

FY08-12

FY04-12

FY13-15

FY13-18

FY13-20

1.1

3.1

3.7

Estimates

11.1

13.7

14.8

Domestic Volumes over FY03-15

Domestic Value (CAGR, %)

Historical

FY09-12

FY08-12

FY04-12

FY13-15

FY13-18

FY13-20

5.0

7.1

Estimates

13.0

15.1

16.0

Domestic Value over FY03-15

Source: Company, MOSL

15 October 2012

Container Corporation of India

Estimating long-term demand for containerized rail transport

If some of the expected triggers play out, the CTO industry could witness a volume

CAGR of 17.6% over FY12-18. Being the dominant player in the industry, CCRI should

be in a position to capture a significant proportion of this opportunity. We expect

the share of rail transport in overall container freight movement to increase from

21% in FY12 to 25% in FY18.

Key assumptions

1. Container port freight traffic:

We have used the estimates of the Maritime Agenda

2020 and the Planning Commission of India.

2. Share of rail in overall container port traffic:

The Indian Railway Vision 2020

estimates container haulage at ~200mt for FY20.

3. Realizations:

We expect realizations to grow at a CAGR of 1.5% for both EXIM and

domestic segments over FY12-17. Realizations are likely to be under pressure,

given lower pricing in case of double-stacking and declining lead distances.

4. EBIT margins:

We expect EBIT margins to expand at a CAGR of 2.5% in the EXIM

business and 3% in the domestic business, on the back of increased efficiencies.

Workings for estimating CTO demand and Concor share by FY17/18

Container Road Traffic

1. EXIM

Total Port Freight in FY12 (MT)

Total Container Traffic (MT)

Total Container + Other Traffic (MT)

Container Freight by all Ports (MT)

% Share

% of Container + Other traffic

Industry CTO volumes (MT)

Share of Railways (%)

Concor Market Share- Volumes (%)

Realizations (INR/ TEU)

TEU's ('000)

Value (INR m)

Multiple (x)

2. DOMESTIC

Industry CTO Volumes (MT)

Concor Market Share (%)

Realizations (INR/ TEU)

Volumes TEU's (m TEU)

Value (INR m)

Multiple (x)

TOTAL (1+2)

Industry CTO Volume (MT)

3. CONCOR

Total Volumes (MT)

Total Value (INR m)

Multiple (x)

% Market Share Share

Share of EXIM - Value-wise

Share of EXIM - Volume-wise

FY12

Base Case

FY17-18

CAGR

(6 Yrs %)

1,758

325

566

325

81.3

16,722

5.8

3.0

20.9

18,570

1.02

18.9

2.4

102.1

74.2

115.4

2.8

72.7

83.6

80.7

10.4

14.8

13.3

14.8

4.0

1.4

18.6

3.3

-0.5

1.5

18.0

19.8

Bear Case

FY20

CAGR

(8 Yrs %)

2,238

388

738

388

17.3

52.6

96.9

16,560

6.8

111

3.5

26.5

66.6

18,391

1.3

23.1

2.9

123.4

87.4

134.3

3.3

70.8

82.9

79.9

11.0

13.4

13.5

13.4

2.2

-0.1

16.2

2.5

-0.7

1.0

15.6

16.6

Opening up of CTO industry in

2006 alone had led to industry

witnessing a 2.5x/ 1.5x/ 1.6x

volume growth in the EXIM/

domestic/ total segments,

over FY08-10.

IR share of container

traffic to increase from

21% in FY12 to

25% by FY18

971

142

268

142

29.2

15,293

2.1

9.4

16,983

0.47

8.0

14.2

-0.3

1.5

13.9

15.6

13.8

-0.6

1.0

13.2

14.2

38.6

28.8

40.6

74.5

80.4

77.1

17.6

17.1

19.0

15.6

14.9

16.1

-0.6

0.4

CCRI's total volumes to

increase at CAGR of

17.1% over FY12-18

15 October 2012

Container Corporation of India

Workings for estimating CTO demand and Concor share by FY17/18 (Cont. from earlier page)

Container Road Traffic

EBIT/ TEU

EXIM (INR/ TEU)

Domestic (INR/ TEU)

Concor - Volumes (TEU's)

EXIM

Domestic

Total

Multiple (x)

Concor - EBIT (INR b)

EXIM

Domestic

Total

Multiple (x)

Tax

Operational PAT (INR b)

Multiple (x)

FY12

Base Case

FY17-18

CAGR

(6 Yrs %)

4,686

1,695

5.8

1.0

6.8

2.6

27.0

1.7

28.7

3.1

8.6

20.1

2.8

2.5

3.0

18.0

13.9

17.3

Bear Case

FY20

CAGR

(8 Yrs %)

4,375

1,798

5.6

1.4

7.0

2.7

1.0

3.0

12.8

14.8

13.1

4,040

1,420

2.1

0.5

2.6

8.6

0.7

9.3

2.0

7.3

21.0

17.3

20.7

27.6

18.4

Expect operating PAT to

increase by 2.8x over

FY12-18

24.4

13.9

2.5

18.2

26.9

14.2

2.9

9.2

20.9

17.8

11.8

2.4

Source: Company, MOSL

Port-wise Container Traffic Assumptions (FY12-18)

FY12

FY13E

FY14E

FY15E

FY16E

FY17E

FY18E

% CAGR

(FY12-18)

9.9

1.0

1.4

25.7

10.3

21.8

10.4

28.1

13.7

9.9

1.0

1.4

25.7

10.3

21.8

10.4

28.1

13.7

Source: MOSL

Major Ports (m tons)

Kolkata

Chennai

Tuticorin

Cochin

JNPT

105

Other Major Ports*

Total Major Ports

123

125

150

189

219

223

Non Major Ports

Total Major and Non-Major Ports

142

156

197

256

295

307

Major Ports (%)

Kolkata

4.8

5.0

4.2

3.4

3.2

3.9

Chennai

21.2

17.1

13.6

11.7

10.9

10.4

Tuticorin

6.5

4.2

3.6

3.3

3.1

3.3

Cochin

3.3

7.4

7.6

6.6

6.0

JNPT

41.1

37.3

38.8

35.8

35.7

34.3

Other Major Ports*

9.7

9.0

8.6

12.8

15.3

14.7

Total Major Ports

86.6

80.0

76.4

73.7

74.2

72.6

Non Major Ports

13.4

20.0

23.6

26.3

25.8

27.4

Total Major and Non-Major Ports

100.0

* Includes Haldia, Paradip, Visakapatpam, Ennore, New Mangalore, Morgumao, Kandla and Port Blair

109

236

325

3.7

11.4

3.1

5.8

33.5

15.1

72.6

27.4

100.0

15 October 2012

Container Corporation of India

Lead distance under pressure in EXIM (kms)

Lead distance has been

under pressure in the

Exim segment, while it

has increased in the

domestic segment

Source: Indian Railways

Distance Between North India ICDs and Ports (kms)

Increasing share of

Mundra and Pipavav

leading to shorter lead

distance for EXIM

segment

Nhava Sheva

(Kms)

TKD

Loni

Dadri

Ludhiana

1,513

1,380

1,460

1,895

Mundra

(Kms)

1,276

1,183

1,228

1,551

Pipavav

(Kms)

1,333

1,325

1,280

1,590

Closer to

Mundra by

(Kms)

237

197

232

344

Closer to

Pipavav by

(Kms)

180

305

Source: Industry

Maritime Agenda 2010-20 growth assumptions (%)

Cargo Volumes

Coal

POL

Iron-ore

Containers

Others

Total

CAGR (FY10-17)

CAGR (FY10-20)

23.0

18.0

7.0

6.0

19.0

15.0

13.0

11.0

Source: Maritime Agenda 2010-20

Summary of Projected Freight Loading by IR by 2020 (M tons)

2011

Coal

RM for steel plants

Pig Iron & Finished Steel

Cement

Iron Ore (Exports)

Iron Ore (Imports)

Food grains

Ferilizers

POL

Containers

Others

Total

2020 Increase

CAGR

(x) (FY11-20)

420

700

1.7

5.8

2.9

12.7

108

3.3

14.2

250

2.5

10.8

2.9

12.6

150

1.6

5.5

1.2

1.6

1.5

4.2

1.2

2.2

210

5.6

21.1

150

2.2

9.0

922

1,850

2.0

8.0

Source: Indian Railway Vision 2020

15 October 2012

Container Corporation of India

Initiating coverage with Buy

Target price of INR1,250 implies 19% upside



While concerns such as high empties cost and muted near term growth outlook in particular

remain, the long-term prospects are favorable for CCRI and outweigh near term concerns.

We value CCRI using DCF methodology. While our DCF value is INR1,250 (19% upside).

Given CCRI’s strong FCF generation capability, high operating RoCE and stable payout ratio,

the best way to value it is through DCF.

DCF based target price of INR1,250

We believe DCF is the best way to capture the intrinsic value of CCRI, given its stable

cash flow, consistent payout ratio, robust ROCE and low re-investment requirements.

CCRI's inimitable pan India network provides it with significant entry barriers, which

coupled with positive industry growth outlook, will allow it to enjoy a prolonged

period of growth. We model CCRI to register a revenue CAGR of 11.5% over FY13-32,

driven a high growth period between FY13-20, post which we have assumed its growth

rate to move from 9.3% in FY21 towards its terminal growth assumption of 5.4%. Our

terminal growth rate assumption is based on RoCE spread of 2.5% over its terminal

period cost of capital at 12.9%. Using the DCF methodology, we arrive at a value of

INR1,250.

Key assumptions

Valuation Inputs

Growth Period

Risk free Rate (Rf)

Levered Raw Beta (B)

Market Risk Premium (Rmp)

Cost of Equity: Rf+B(Rmp)

Stable Period

Risk free Rate (Rf)

Levered Raw Beta (B)

Market Risk Premium (Rmp)

Cost of Equity: Rf+B(Rmp)

India country Default Spread

Adjusted Risk free Rate (Rf)

Terminal Growth rate (Tg)

(%)

8.0

0.40

7.5

11.0

8.0

0.65

7.5

12.9

2.0

6.0

5.4

Comments

RBI 10 year G-sec Bond Yield 5/10/2012

Bloomberg 1 year average Raw Regression Beta

Implied India Risk Premium based on Sensex

CAPM

RBI 10 year G-sec Bond Yield

Assuming long term Beta will trend towards 1x

Implied India Risk Premium based on Sensex

CAPM

Based on S&P Bond Default spread of 2% based

on India’s BBB+ rating

Real Risk free rate in India

ROCE spread of 2.5% over terminal cost of capital

Source: MOSL

15 October 2012

Container Corporation of India

15 October 2012

Terminal Gr. (%)

Container Corporation of India

Comparative Valuations

Company Name

Mkt Cap

CMP (USD b)

2.6

0.3

0.1

2.8

1.3

57.3

15.2

22.0

BV (INR)

FY13 FY14

480.0

90.3

131.6

167.8

3.7

46.6

34.4

9.9

536.1

97.9

146.8

200.7

3.7

4.3

51.9

39.6

11.1

EPS Gr. (%)

FY13 FY14

8.7

13.0

-6.0

29.8

10.9

24.3

14.9

29.2

12.2

6.3

16.7

15.7

48.1

24.9

18.3

14.0

21.5

12.6

P/E (x)

FY13 FY14

14.5

10.3

7.5

5.2

12.6

11.6

12.7

15.7

10.6

13.6

8.9

6.4

3.5

10.1

9.8

11.1

12.9

9.4

P/BV (x)

EV/ EBITDA (x)

RoE (%)

FY13 FY14 FY13 FY14 FY13 FY14

2.2

1.6

1.0

0.8

0.7

1.7

2.6

2.5

2.1

2.0

9.6

8.3

16.0

1.5

6.6

5.7

15.6

0.9

5.3

4.7

14.1

0.7

7.4

5.4

14.6

0.7

4.2

3.5

5.8

1.5

6.8

5.5

14.7

2.3

7.0

6.3

20.8

2.2

9.2

8.1

16.4

1.9

6.2

5.7

22.2

Source: Bloomberg, Company,

15.1

16.7

14.5

18.4

6.8

15.7

23.2

18.7

20.5

MOSL

Concor

1,048

Gateway Distripark

142

Allcargo

130

Arshiya International

134

Guangshen Railway

China Railway Tielong

Union Pacific Corp

121

Canadian Pacific Railway 86

CSX Corp.

Prices as on 11 October 2012

PE below historical average of 15.3x

P/B below historical average of 2.6x

EV/ Sales below historical average of 3.1x

EV/ EBITDA below historical average of 10.5x

15 October 2012

Container Corporation of India

Risks and concerns

Execution risk / possible delays in DFC implementation:

Successful execution of the

DFC project has the potential to increase container rail traffic by 1.7-2x. Given its

critical nature and the possible upside from its implementation, the project has been

able to garner considerable support from both the central and state governments.

Nonetheless, the project faces considerable challenges in the form of pending land

acquisitions, funding requirements and execution risks. Any delays in project

execution would mean delayed upsides and lower our estimated valuations for CCRI.

Forays into new segments:

CCRI is foraying into new segments such as warehousing,

air cargo, ports, and cold chain management. While this would transform CCRI into a

total logistics player, it would also present significant execution challenges.

Unfavorable EXIM trade mix leading to high empties cost:

Due to the mismatch

between exports and imports in trade, particularly at some of the new ports and in

domestic operations, the empties cost of CCRI has been steadily increasing.

Unbalanced trade at key ports could further increase empties cost, which stood at

INR1.2b in FY12 and INR423m in 1QFY13.

Risks related with economic slowdown:

Bulk of the container rail transport in India is

for EXIM trade, which is highly correlated with GDP growth. Any slowdown in economic

growth would have a negative impact on EXIM trade, and in turn on the growth outlook

for CTOs like CCRI.

Overdependence on single rail corridor:

Another key risk holding back growth of CTO

players is single rail corridor at key ports like Mundra and Pipavav, due to which

turnaround time increases and rail traffic gets negatively impacted. Rail transport of

the overall container traffic is low at 20-30%.

Challenges with regard to JNPT expansion plans:

With regard to JNPT expansion for

terminal-4, the erstwhile bidders withdrew in August 2012. The port authorities are

in the process of inviting fresh bids, which could delay the planned capacity additions.

Tariff Authority for Major Ports (TAMP) related issues:

In February 2012, TAMP ordered

Nhava Sheva International Container Terminal (NSICT) and Gateway Terminal (GTICT)

to lower tariffs by 27.85% and 44.28%, respectively. The tariff cut was largely because

these ports were operating at 117%/135% capacity utilization (based on the minimum

guaranteed throughput). This tantamounts to punishing efficiency, as the revenue

share (paid to JNPT) is not allowed as cost while fixing the tariff. Hence, the operators

will attempt to lower their throughput to just the minimum guaranteed.

15 October 2012

Container Corporation of India

Company background

Container Corporation of India

(CONCOR; Bloomberg Code: CCRI)

is a state-owned

company incorporated in March 1988. It was set up with the intent to develop

multimodal transport and logistics support for domestic and international

containerized cargo. Post the commencement of its operations, Indian Railways’

container freight service is being handled by CONCOR through yearly MoUs.

Revenue break-up (FY12)

EBIT break-up (FY12)

Source: MOSL, Company

Organizational structure

Managing Director

Director (International

Marketing & Operation

(Exim, Operation,

Commercial, Marketing

Air Cargo)

Director (P&S)

Director (Finance)

Director (Domestic)

Projects, Engineering

Technical & MIS

(Finance, Accounts,

Secretarial & Internal

Audit)

HRD

(Domestic Operation,

Common Marketing)

Region-wise break-up

Top terminal contributors (% of total)

Source: MOSL, Company

15 October 2012

Container Corporation of India

CCRI's Pan-India terminal network

Source: Company

15 October 2012

Container Corporation of India

Financials and Valuation

Income Statement

Y/E March

Net Sales

Change (%)

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income - Rec.

PBT after EO Exp.

Current Tax

Deferred Tax

Tax Rate (%)

Reported PAT

Change (%)

Margin (%)

2011

38,992

4.5

10,156

26.0

1,489

8,667

1,971

10,588

1,647

179

17.2

8,763

12.7

22.5

2012

41,009

5.2

10,234

25.0

1,621

8,613

3,135

11,693

2,885

152

26.0

8,656

-1.2

21.1

2013E

44,469

8.4

11,331

25.5

1,867

9,464

2,992

12,426

2,808

211

24.3

9,406

8.7

21.2

2014E

49,939

12.3

13,029

26.1

2,222

10,807

2,457

13,232

3,003

226

24.4

10,004

6.3

20.0

(INR Million)

2015E

56,220

12.6

14,752

26.2

2,552

12,200

2,543

14,709

3,447

259

25.2

11,002

10.0

19.6

Balance Sheet

Y/E March

Equity Share Capital

Total Reserves

Net Worth

Deferred Liabilities

Other Liabilities

Total Loans

Capital Employed

2011

1,300

48,088

49,388

2,288

695

296

52,667

2012

1,300

54,252

55,552

2,438

449

234

58,673

35,856

11,268

24,588

1,151

2,447

3,903

32,989

360

303

27,616

4,710

6,406

4,865

1,540

26,583

58,673

2013E

1,300

61,095

62,395

2,438

494

254

65,581

49,356

13,135

36,221

1,151

2,447

4,002

28,289

396

311

22,246

5,336

6,530

5,020

1,510

21,759

65,581

(INR Million)

2014E

1,300

68,385

69,685

2,438

543

274

72,940

58,556

15,356

43,200

1,151

2,447

3,995

29,204

442

350

22,420

5,993

7,057

5,443

1,614

22,147

72,940

2015E

1,300

76,523

77,822

2,438

598

294

81,152

67,756

17,908

49,848

1,151

2,447

4,217

31,452

496

394

23,816

6,746

7,963

6,110

1,853

23,489

81,152

Gross Block

33,683

Less: Accum. Deprn.

9,722

Net Fixed Assets

23,961

Capital WIP

1,069

Total Investments

1,956

Other Assets

2,475

Curr. Assets, Loans&Adv.

28,230

Inventory

125

Account Receivables

296

Cash and Bank Balance

22,961

Loans and Advances

4,848

Curr. Liability & Prov.

5,023

Current Liabilities

3,662

Provisions

1,361

Net Current Assets

23,207

Appl. of Funds

52,667

E: MOSL Estimates; * Adjusted for treasury stocks

15 October 2012

Container Corporation of India

Financials and Valuation

Ratios

Y/E March

Basic (INR) *

Consol EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x) *

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

Dividend Yield (%)

FCF per share

Return Ratios (%)

RoE

RoCE

Working Capital Ratios

Asset Turnover (x)

Inventory (Days)

Debtor (Days)

Creditor (Days)

Leverage Ratio (x)

Current Ratio

Interest Cover Ratio

2011

67.4

78.9

380.0

18.0

26.8

2012

66.6

79.1

427.4

19.2

28.8

2013E

72.4

86.7

480.0

19.7

27.2

2014E

77.0

94.1

536.1

20.9

27.1

2015E

84.6

104.3

598.7

22.0

26.0

14.0

11.8

2.2

2.7

10.6

2.1

58.5

12.9

10.8

1.9

2.6

10.1

2.1

-21.5

12.1

9.9

1.7

2.3

8.8

2.2

22.3

11.0

9.0

1.6

2.0

7.6

2.4

32.9

19.0

22.9

16.5

22.3

16.0

21.0

15.1

20.0

14.9

19.9

0.7

1.7

2.7

49.4

0.7

4.6

2.7

62.2

0.7

4.7

2.5

59.4

0.7

4.7

2.5

57.6

0.7

4.7

2.5

57.6

5.6

177

5.1

160

4.3

323

4.1

341

3.9

358

Cash Flow Statement

Y/E March

EBIT

Depreciation

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

(inc)/dec in FA

(Pur)/Sale of Investments

Investment Income

CF from investments

(Inc)/Dec in Debt

Interest Paid

Dividend Paid

(Inc)/Dec in Deff Tax Liab

CF from Fin. Activity

Inc/Dec of Cash

Add: Beginning Bal

Closing Balance

2011

8,667

1,489

1,825

-2,793

5,537

-2,095

-34

1,971

-159

-128

2,345

179

-2,344

3,035

19,925

22,960

2012

8,613

1,621

3,037

-395

6,801

-2,331

-491

3,135

312

-62

2,493

150

-2,459

4,655

22,961

27,616

2013E

9,464

1,867

3,020

-601

7,710

-13,500

2,992

-10,508

2,563

-2,572

-5,370

27,616

22,246

(INR Million)

2014E

10,807

2,222

3,229

-158

9,643

-9,200

2,457

-6,743

2,714

-2,726

174

22,246

22,420

2015E

12,200

2,552

3,707

-113

10,932

-9,200

2,543

-6,657

2,865

-2,879

1,396

22,420

23,816

15 October 2012

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