Container Corp.’s Shares Fall The Most In Three Months Despite Returning To Profit In Q2

Why Container Corp.’s shares are declining despite beating estimates in Q2.

Hormaz Fatakia

06 Nov 2020, 03:57 PM IST

An employee observes a shipping container being lifted by a gantry crane at the Kao Ming Container Terminal Corp. terminal at the Port of Kaohsiung in Kaohsiung, Taiwan. (Photographer: Billy H.C. Kwok/Bloomberg)

Shares of Container Corp. fell the most in three months after the state-run cargo shipping company received a demand letter from the Ministry of Railways.

The company has received a demand letter of Rs 1,275.9 crore, including goods and services tax from the Ministry of Railways as the annual land licence fee for FY21 for 13 terminals, according to an exchange filing.

Container Corp., a miniratna PSU under the Ministry of Railways, had projected Rs 466 crore for the same. As on Sept. 30, the company has provided an amount of Rs 233.31 crore as land licence fee for all terminals, by applying extant policy of railways, the filing said.

“Higher demand of land licence fee by the ministry is a key negative for the stock, even though results were operationally above estimates,” Nomura analysts Priyankar Biswas and Neelotpal Sahu said in a post-earnings note. The land licence fee demand further accentuates the overhang on the stock due to wide divergence over its assessment, Nomura said, as it maintained its ‘neutral’ rating with a price target of Rs 438 apiece.

Container Corp.’s Shares Fall The Most In Three Months Despite Returning To Profit In Q2

Container Corp.’s revenue declined 14% year-on-year to Rs 1,502.7 crore, but was ahead of the consensus estimate of Rs 1,392.2 crore.

The PSU also returned to profitability during the quarter, registering a net profit of Rs 187.5 crore, also higher than the estimated Rs 120.8 crore. It had reported a net loss of Rs 322 crore a year ago, owing to an exceptional loss of Rs 861.05 crore, classified as claims under Service Export from India Scheme and were disallowed by the Directorate General of Foreign Trade.

The earnings before interest, tax, depreciation and amortisation fell 26% over the year earlier to Rs 312.9 crore, while operating margin stood at 20.8% against 24.5%.

Of the 37 analysts tracking Container Corp., 18 have a ‘buy’ rating, 15 recommend a ‘hold’ and the rest suggest a ‘sell’. The average of Bloomberg consensus 12-month price targets implies an upside of 13%.

Shares ended 7.2% lower - falling the most in three months to Rs 378.05.