Russian rail volumes continue to grow
TransContainer PAO (BE:TRCNq) 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.
Story intact: Runaway market growth
10.2% year-on-year growth in Russian rail freight volumes (TRC 8.9%) in FY16, plus 22.4% year-on-year growth in Q117 (TRC 23.7%) shows our investment thesis remains intact. Namely, supernormal growth is set to continue in the coming years as Russian industry recovers from recession plus a larger share of freight is handled via rail flat cars. TRC is the only equity play on these trends.
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