Jefferies raises target price for Concor, says re-rating on the cards; stock spurts 2%

Jefferies has raised the target price on Concor from Rs 775 to Rs 825, which represents a potential upside of around 15 percent from the current levels.

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The road-to-rail cargo shift is seeing traction due to the Dedicated Freight Corridor (DFC) and Container Corporation of India (Concor) should start to regain lost market share as its DFC network presence pays off, foreign brokerage firm Jefferies said.

At 10 am, shares of state-owned Concor were trading 2.15 percent up at Rs 714.05 on the BSE.

Jefferies has raised the target price on Concor to Rs 825 from Rs 775 earlier. The new target price represents a potential upside of around 15 percent from the current levels.

In a note, the brokerage firm said the Dadri-Rewari stretch of DFC was completed in 1Q FY24.

“Gujarat ports to Dadri is 1,100-1,200 km and DFC is transporting cargo at Rs1.1/t km vs Rs1.4 and above by road. Time-table trains are assuring confirmed cargo delivery schedules with rail being at least 12-18 hours lower than road,” it noted.

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Trains are electrified between Palanpur Junction to Dadri and the last mile from Palanpur to Pipavav Port. Besides, Palanpur to Mundra should be electrified by December 2023, which will further reduce transit time as diesel to electric loco changeover (2-4 hours) will not be needed.

On the operational front, Concor has placed orders for new rakes which can carry higher loads. First mover advantage here in tandem with Inland Container Depots (ICDs) along the DFC should give Concor an opportunity to regain share at competitive prices, Jefferies noted.

“We believe Concor’s volumes should see 15 percent CAGR in FY23-26E with DFC. June 2023 saw the Gujarat cyclone impact port/rail operations and the Odisha rail accident leading to delays as railways realigned freight and passenger operations to prioritise safety. We believe normalised rail operations, the road to rail shift and market share/margin recovery should lead to stock upside,” it said, adding that Concor’s re-rating is on the cards.

Concor shares are down 3 percent on YTD basis, while the 1-year return stands at (-)6 percent.

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Last month, Concor reported an over 17 percent decline in net profit at Rs 246 crore for the first quarter ended June 30, 2023.

Revenue from operations dropped 3.6 percent to Rs 1,922 crore. The company said the export-import (EXIM) and domestic segments registered a fall of 5.3 percent and 0.3 percent, respectively.

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