Macquarie says balance between market share, profitability key for CONCOR; stock falls 4%

Revenue of the logistics solutions provider fell about 4 percent YoY to Rs 1,923 crore. This was on the back of lower sales as compared to last year, for both segments — EXIM and Domestic.

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Shares of Container Corporation of India (CONCOR) fell 4 percent on August 11 as June quarter earnings disappointed investors, triggering a sale of the logistics solutions provider’s shares.

Consolidated net profit dropped 17 percent YoY to Rs 245.19 crore during the quarter ended June.

Revenue fell about 4 percent YoY to Rs 1,923 crore. This was on the back of lower sales as compared to last year, for both segments — EXIM and Domestic.

Rail is the mainstay of CONCOR’s transportation plans and strategy. Majority of its terminals are rail-linked, with rail as the main carrier for haulage. Though, some of CONCOR’s terminals are exclusively road-fed as well.

EBITDA (Earnings Before Interest Tax Depreciation and Amortisation) slipped 17 percent to Rs 395.82 crore and operating margin contracted to 20.6 percent in the June quarter from 24 percent a year ago.

At 10:20 am, shares of the company were trading 3.4 percent lower at Rs 672.7 on the BSE.

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Macquarie observed that an overall underperformance was a result of a lower realisation and an increased land license fee. Even though there was an increase in volume, the decrease in price counterbalanced this, resulting in a drop in revenue, according to the brokerage firm.

Analysts’ views

The foreign brokerage firm has a ‘neutral’ rating on the stock with a target price of Rs 620. Macquarie said a balance between market share and profitability would be key.

CONCOR had experienced a decline in its market share primarily in the western market (Mundra) and the NCR segment. This drop in market share was attributed to competitive pricing strategies from rivals and also faced competition from the road transport sector.

In order to enhance profitability from domestic operations, CONCOR had introduced value-added services such as distribution logistics and last-mile logistics.

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