On The Move

Analysts remain bullish on Container Corporation despite the less-than- expected profit growth in the past quarter

The business of moving goods in containers across the country and overseas might not seem terribly exciting, but it is certainly profitable. That's why Container Corporation of India (Concor) -- the only company right now that transports goods in containers by rail for customers -- is high on the list of value-seeking investors.

It's a business many believe is highly lucrative -- more so because very little of its vast potential has actually been exhausted. Internationally, nearly 80 per cent of cargo shuttles around in containers.

In India, less than 40 per cent is moved around in containers. That means there's still a high proportion of non-containerised cargo in the country, still waiting to be converted into containerised cargo.

In the past quarter, Concor was one of the few companies that bucked the strong drift towards lower income and profits. Concor's operational income for the three months ended December rose 18 per cent to Rs 321.20 crore from the same period last year.

But, "the third quarter performance has actually been lower than projected because the September 11 events have affected export-import traffic," says K L Wasan, senior manager - planning and development at Concor.

Total operational expenditure increased 24 per cent to Rs 225.45 crore but its effect on profit was partially blunted by interest costs which declined by more than a quarter to Rs 75 lakh from Rs 1.06 crore. Net profit rose nine per cent to Rs 63.08 crore, aided by a 46 per cent jump in other income. Analysts point out that profit could have climbed higher, if the adjustment for deferred tax -- Rs 4.63 crore -- had not taken place.

Still, total income was three per cent down on the previous quarter. The jolt to growth in the quarter ended December, say analysts, came from the September 11 terror attacks' impact on international trade, which shrank seven per cent.

Nearly 70 per cent of Concor's income is derived from its international traffic operations; it also contributed 84 per cent to profit before tax and interest this quarter. Some analysts believe the shock to trade may now be wearing off somewhat and have turned cautiously optimistic about Concor's near-term prospects.

The company is mildly upbeat as well. "Concor is feeling, to some extent, the slowdown in the economy and international trade, but is basing its growth on the expansion of the business and gap in market supply for our services," Wasan says. The company expects cargo volumes to swell by 19 per cent by the end of fiscal 2002. Volumes were up 16 per cent the previous year.

In a recent conference call, Concor also indicated that it might scale down its capital expenditure plans; it had earlier said it would spend around Rs 1,400 crore -- mostly from internal accruals -- in the next five years on bulking up its distribution and transportation network.

Analysts don't expect the development to stunt growth, anyway. Concor also estimates haulage charges -- the biggest component of expenditure -- to rise between four and six per cent in fiscal 2003. The company acknowledges that it will not be able to pass on these costs to consumers, so it's betting on higher volumes to offset the rise in costs.

Analysts continue to give full backing to Concor's stock. After being caged in a Rs 125-135 range for most of the year, the stock broke free in December 2001 with eager investors chasing the stock to a high of Rs 202. One brokerage expects the stock to touch Rs 300 in the next twelve months. Investors could look at any price dip as a buying opportunity.