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Long-term drivers in place

Initiation | General Industrials | 11 Jul 2016

TransContainer (TRC) is weathering the sanctions and oil price-led economic slowdown in Russia well. While current earnings are cyclically depressed, cash flow generation remains positive and a payout ratio of 25% is intact. Our forecast five-year EBITDA CAGR of 11% is driven by end-market growth, and by TRC capturing a bigger share of this with its higher-margin integrated freight forwarding business. In the 10 years since its foundation, management has invested RUB24bn enhancing its fleet and integrated client offering, thereby laying the foundations for earnings growth and margin expansion as markets recover.


Growth accelerating in Q3, forecasts raised

Update | General Industrials | 06 Dec 2018

TransContainer delivered a significant step-up in revenue and EBITDA growth in Q3, supported by industry growth, higher efficiencies and a more favourable business mix. We have increased our FY18 forecasts to reflect the strong Q3 results (revenue, EBITDA and net income forecasts rise by 4%, 15% and 26% respectively) and made more modest increases to our FY19 and FY20 forecasts. Our DCF valuation increases by 4% to RUB5,400/share, implying 20% potential upside to the current share price.


Revenue and cost initiatives paying off

Outlook | General Industrials | 25 Sep 2018

TransContainer (TC) has continued to show strong results, with Q218 EBITDA, reported on 29 August, increasing by 13% y-o-y. The company is benefiting from structural growth, especially switching rail cargo to containers, and Russia's economic recovery. Recent monthly market data bode well for TC's Q318 results. It has also continued to pursue initiatives that are benefiting the EBITDA margin by increasing the proportion of Integrated Services, profit-making runs and block trains. Our DCF model gives a valuation of RUB5,200/share (unchanged), which offers 12% upside to the current share price.


Strong Q2 results, led by a rise in productivity

Update | General Industrials | 04 Sep 2018

On 29 August, TransContainer announced Q218 IFRS results. The results showed further growth, with a 6% increase in revenue and 16% growth in EBITDA. We think the main point of interest is how TransContainer has continued to increase productivity by improving the ratio of ‘profit-making runs’ by its containers. The further acceleration in market container volumes in July bodes well for Q3. We have maintained our 2018 EPS but increased our DCF valuation by 2%.


Record EBITDA margins in Q317

Update | General Industrials | 06 Dec 2017

TransContainer announced its third quarter IFRS results on 28 November, revealing continued growth in net income and EBITDA, driven by increased container traffic (y-o-y and q-o-q) and falling empty run ratios. Net income grew by 33% from second quarter levels and was more than double that seen in the same period last year. EBITDA margins increased to record levels of 50.3%. We expect margins to return to more normal levels, but remain strong (c 40%) in the long term aided by continued market growth. The company continues to trade well below global peers on EV metrics and our valuation of RUB5,100/share (derived from a mix of EV/EBITDA and DCF methodologies) indicates around 15% upside in the shares.


Structural and cyclical locomotion

Outlook | General Industrials | 20 Sep 2017

Our increased three-year EBITDA CAGR of 20% for TransContainer is driven by rising rates of ‘containerisation’ in Russian rail freight, a gathering pace of economic rebound in Russia and strong operating efficiency delivered by company management. Our increased forecasts are the main driver behind an increase in fair value to RUB4,900, which implies 23% upside to current levels. The stock offers investors unique exposure to attractive structural and cyclical growth factors in Russia as well as a management team that has shown its ability to manage the business and cash flows during difficult macroeconomic conditions.


Russian rail volumes continue to grow

Update | General Industrials | 26 Apr 2017

TransContainer's (TRC) FY16 results announcement on 29 March was in line with Edison and market expectations. Russian rail freight volumes are growing by double-digit amounts and TRC continues to show its ability to exploit this growth trend. Our three-year EBITDA (company definition) CAGR of 12.7% is driven by continued economic recovery in Russia, higher rates of ‘containerisation' and enhanced profitability as an increasing volume of freight is handled by TRC's more profitable Integrated Freight Forwarding (IFF) business. TRC remains the only way to gain equity exposure to these underlying trends. The company's Q1 operating update further bolsters the equity story with an increase of 22.4% in Russian rail freight market volumes.


Runaway market growth

Update | General Industrials | 01 Dec 2016

TransContainer’s (TRC) nine-month and Q3 results announcement on 28 November was in line with Edison and market expectations. We leave our forecasts unchanged, but acknowledge that if the Russian rail container market continues to grow at the rate witnessed in recent months, our estimates (five-year EBITDA CAGR 11.3%) will look conservative. We await full year results, which we expect in late March, for a management update on rail container market growth.


Q2 volume recovery boosts earnings story

Update | General Industrials | 08 Sep 2016

TransContainer's (TRC) H116 results showed the company is benefiting from improving market conditions bolstered by active cost management. Russian rail-freight volumes increased by 6.1% in H116; Q2 volumes in particular accelerated significantly. This rebound, in contrast to a sluggish overall economic performance in Russia, was driven by increasing levels of ‘containerisation' in the country and gives us confidence in our FY16 earnings forecasts for TRC. The 360bp improvement in EBITDA margins versus H115 is a further reason to be positive as evidence mounts that TRC is moving well beyond its FY15 earnings trough.