Concor shares: Elara says 'accumulate' stock, sets target price at Rs 1,073
Concor shares are up 14.20 per cent in 2024 so far and 64 per cent in the past one year. Elara has upped its EPS estimates and suggested a price target of Rs 1,073 on the stock.
- Feb 29, 2024,
- Updated Feb 29, 2024 3:35 PM IST
Elara Securities has increased its earnings estimates on Container Corporation of India (Concor) by 8 per cent each for FY25 and FY25 and suggested 'accumulate' rating on the stock with a revised target of Rs 1,073 on the PSU from Rs 940 earlier.
With EXIM market share stable at 55-60 per cent, Elara believe the focus would be on ramping up volume through competitive pricing by passing on economics of scale benefits to customers. New initiatives such as the MoU with Germany-based global logistics firm DB Schenker to provide end-to-end services in the EXIM segment would also lift Concor's performance, Elara said.
Concor shares are up 14.20 per cent in 2024 so far and 64 per cent in the past one year.
The Concor management is confident of a 10 per cent volume growth in EXIM in FY24 against 7 per cent in 9MFY24 and sees a higher growth next year. The segment EBIT margin stays healthy at 20 per cent and that the DFC connectivity with JNPT by 2025 would be incrementally positive, Elara said. The brokerage said that the Dadri market contributed 21 per cent to total EXIM originating volume for Concor in FY23.
Container Corporation of India’s Dadri Inland Container Depot (ICD) near Greater Noida is spread over 110 acres of EXIM multi-modal logistics hub with direct connectivity with dedicated freight corridor (DFC) within 2km. It is developed on railway land in a JV with Star Track Terminals, CMA CGM, Transworld and Allcargo Terminals. Total catchment area is 50 km, which includes more than 4,000 industrial units across industries, such as machinery, auto parts, white goods, frozen meat, scrap, waste paper, handicrafts, artware, textiles, and chemicals.
"Dadri has a high share of originating volume, which is beneficial for CCRI as it is the largest container train operator with volume of 400,000 TEU and targets to reach 1.0mn TEU in the medium term. Prior to DFC, the Dadri-Mundra distance on rail took 72 hours, which currently is lessened to 36 hours with the potential to decrease further to 24 hours. Along the same route, CRRI runs on average three trains per day on double stack basis at a cost that is 10 per cent lower than road, leading to ongoing diversion from road to rail," Elara said.
The volume from Dadri grew at 10-12 per cent in the past 3-4 years, but it is expected to grow at 30 per cent going ahead, due to huge industrial development and investments in Uttar Pradesh, Elara said.
"After two years of consecutive muted performance in EXIM due to increased competition, which resulted in market share loss, the past two quarters saw average EXIM originating volume growth by 14 per cent YoY, led by improvement in double stack operations, service quality and transit times. Growth momentum is likely to be supported in catchment territory as the UPSIDA is developing industrial areas with Rs 2.5 lakh crore investment via eAuction of 84 projects. Moreover, 16 projects worth Rs 1,000 crore have been sanctioned to build warehouses, dry ports and logistics parks. On the tariff side, levy of busy season surcharge by Indian Railways is expected to cease from 31 March 2024," it said.
Elara Securities has increased its earnings estimates on Container Corporation of India (Concor) by 8 per cent each for FY25 and FY25 and suggested 'accumulate' rating on the stock with a revised target of Rs 1,073 on the PSU from Rs 940 earlier.
With EXIM market share stable at 55-60 per cent, Elara believe the focus would be on ramping up volume through competitive pricing by passing on economics of scale benefits to customers. New initiatives such as the MoU with Germany-based global logistics firm DB Schenker to provide end-to-end services in the EXIM segment would also lift Concor's performance, Elara said.
Concor shares are up 14.20 per cent in 2024 so far and 64 per cent in the past one year.
The Concor management is confident of a 10 per cent volume growth in EXIM in FY24 against 7 per cent in 9MFY24 and sees a higher growth next year. The segment EBIT margin stays healthy at 20 per cent and that the DFC connectivity with JNPT by 2025 would be incrementally positive, Elara said. The brokerage said that the Dadri market contributed 21 per cent to total EXIM originating volume for Concor in FY23.
Container Corporation of India’s Dadri Inland Container Depot (ICD) near Greater Noida is spread over 110 acres of EXIM multi-modal logistics hub with direct connectivity with dedicated freight corridor (DFC) within 2km. It is developed on railway land in a JV with Star Track Terminals, CMA CGM, Transworld and Allcargo Terminals. Total catchment area is 50 km, which includes more than 4,000 industrial units across industries, such as machinery, auto parts, white goods, frozen meat, scrap, waste paper, handicrafts, artware, textiles, and chemicals.
"Dadri has a high share of originating volume, which is beneficial for CCRI as it is the largest container train operator with volume of 400,000 TEU and targets to reach 1.0mn TEU in the medium term. Prior to DFC, the Dadri-Mundra distance on rail took 72 hours, which currently is lessened to 36 hours with the potential to decrease further to 24 hours. Along the same route, CRRI runs on average three trains per day on double stack basis at a cost that is 10 per cent lower than road, leading to ongoing diversion from road to rail," Elara said.
The volume from Dadri grew at 10-12 per cent in the past 3-4 years, but it is expected to grow at 30 per cent going ahead, due to huge industrial development and investments in Uttar Pradesh, Elara said.
"After two years of consecutive muted performance in EXIM due to increased competition, which resulted in market share loss, the past two quarters saw average EXIM originating volume growth by 14 per cent YoY, led by improvement in double stack operations, service quality and transit times. Growth momentum is likely to be supported in catchment territory as the UPSIDA is developing industrial areas with Rs 2.5 lakh crore investment via eAuction of 84 projects. Moreover, 16 projects worth Rs 1,000 crore have been sanctioned to build warehouses, dry ports and logistics parks. On the tariff side, levy of busy season surcharge by Indian Railways is expected to cease from 31 March 2024," it said.