Concor shares rise after Q2 net profit, revenue beat estimates; should you buy the stock?

Container Corporation (Concor) shares jumped over 2 percent on November 6 after the company’s September quarter earnings beat street estimates. Its revenue jumped 11 percent on-year and profit after tax (PAT) clocked an impressive growth of 18 percent in the fiscal second quarter.

Going forward, analysts expect Concor’s volume to see healthy growth. The Dedicated Freight Corridor’s (DFC) commissioning will certainly be a meaningful boost to volumes and efficiency, they said.

At 9:17 am, Cocor shares were trading nearly 2 percent higher at Rs 727.60 on the National Stock Exchange (NSE).

According to Jefferies, Concor’s volumes should see a 15 percent CAGR in FY23-26E and a 23 percent profit CAGR with DFC. “We believe normalised rail operations post June cyclone, road to rail shift and market share/margin recovery should lead to stock upside,” it said.

The company is likely to maintain its profitability and market share position, and should benefit as cargo movement transfers from road to rail, analysts added. Concor currently has a market share of 65-70 percent, according to the management.

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Should you buy, hold or sell Concor shares?

The international brokerage firm has a ‘buy’ rating on Concor stock. For the base case, it has kept the target price at Rs 825. “We expect market share to be maintained given Concor’s pan-India presence. DFC should lead to a rise in volumes of 15 percent CAGR over FY23-26E,” it said. Analysts also expect a robust balance sheet with net cash.

Meanwhile, in the Upside Scenario, Jefferies has pegged Concor’s target price at Rs 1,050. A sharp upside is expected in case the DFC is commissioned earlier than scheduled, and Concor is able to increase its market share further. If the company’s operations improve further with less empty-running, leading to margin expansion, it could act as a catalyst for the stock.

Downside risks include indefinite delay in DFC; and Railways bringing up land licence fee (LLF) again.

Also Read | CONCOR Q2 net profit up 21% on-year; stock jumps 4%

Another foreign brokerage Citi also has a ‘buy’ call on the stock with a target price of Rs 844 per share.

Dedicated Freight Corridor’s (DFC) commissioning will certainly be a meaningful boost to the volumes and efficiency of Concor, according to Nuvama Institutional Equities. However, geopolitical headwinds might defer the company’s capex plans by a year or so.

“But we believe that the DFC story should largely play out in FY24E. With the introduction of high capacity rakes, double-stacking and Concor tapping into new avenues such as bulk cement, we expect strong growth in volumes,” it said. Furthermore, management remained assertive of achieving 10-12 percent growth in volumes, top-line as well as bottom-line.

Nuvama has a hold rating on the stock with a target price of Rs 690. “The stock’s current valuation adequately captures the DFC volume potential, in our view,” it said. The domestic brokerage assumes DFC benefits to start kicking in FY24E. “Any further delay in commissioning of DFC will be a downside risk to our fair value target price,” it said.

Also Read | Zomato’s second straight quarter of profit sees brokerages raise price targets

Concor shares have risen nearly 13 percent in the last six months. However, year-to-date, the stock has fallen around 3 percent.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.