Hold Container Corporation; target of Rs 680: JM Financial.

Container Corporation (Concor)’s 1QFY19 adjusted PAT declined 8% YoY/5% QoQ (15%below JMFe/18% Bloomberg consensus; adjusted for export incentives of INR 700mn) ashigher Land License Fees (LLFs) and wage revisions offset the benefits from double stacking,price increases and efficiency gains. EXIM handling volume grew 11% YoY (originating volume +8%), while domestic was up 9%. Concor maintains its earlier 10-12% volume growth guidance and hopes to improve profitability in coming quarters on the back of double stacking and price increases (to pass on higher costs).

We maintain HOLD with aMar’19 TP of INR 680. While we like Concor’s market leadership (biggest beneficiary of upcoming DFC), we are constrained by its expensive valuation and await a better price point for entry (currently trades at 19.6x FY19E EV/EBITDA). Key risk to our call is better than expected EXIM volume growth and a sharp haulage charge increase by Indian Railways.