Container Corporation of India (Concor) has been the worst performer among major logistics & port stocks registering returns of about 4 per cent over the past three months as compared to 10-12 per cent for peers Gateway Distriparks and Adani Ports and SEZ.
Uncertain outlook on the export-import (EXIM) trade front, market share loss, lack of progress on divestment, and weak June quarter results weighed on the stock.
Volume and margin movement will be key triggers for the stock going ahead.
As was the case in the previous quarter, margin performance was muted even in the June quarter.
Operating profit in the quarter was down 17 per cent at Rs 391 crore missing estimates by over 15 per cent.
Operating profit margins at 20.4 per cent, too, were down sharply by 350 basis points over the year-ago quarter.
ICICI Securities points out that operating profit per TEU (or twenty-foot equivalent container) in the quarter was the lowest level in 8 quarters and was impacted by the escalation of provision for land license fee (LLF) and lower realisation.
While the company’s EXIM volumes in the quarter fell by 1.1 per cent sequentially, domestic volumes dipped by 5.9 per cent.
This was on account of the Balasore train accident, Cyclone Biparjoy and unseasonal rains in different parts of the country.
Despite the weak Q1 show, the company is confident of meeting its EXIM growth target of 10-12 per cent in FY24 given signs of recovery and expects to maintain margins at the FY23 level (22.7 per cent).
Some brokerages, however, believe that there could be some headwinds on the margin front. Say Alok P Deshpande and Adil Khan of Nuvama Research, “Concor’s EXIM segment has seen a drop in market share, led largely by competitive pricing.
"Concor lost market share at Mundra Port and in Pipavav, both important ports in our view.
"This could culminate into a business mix tilting towards the domestic side (lower margin segment), which may bring down overall margins.”
The brokerage, which has cut its FY24 and FY25 earnings estimates by 8 per cent each due to an upward revision of land licence fee, has a 'hold' rating on the stock.
It cites the falling western dedicated freight corridor’s volumes, which have failed to move the needle for Concor’s overall volumes, and the recent market share loss as reasons for the rating.
EXIM volumes will depend on the global recovery.
July data indicates that EXIM trade was largely stable falling 1 per cent as compared to June, while container volumes (for August) were down 1.6 per cent month-on-month.
However, as compared to the year-ago period, container cargo volumes for August increased by 16 per cent, post a tepid Q1FY24 (1 per cent year-on-year).
This, according to Emkay Research, suggests positive volume trends for rail logistics operators such as Concor.
B&K Securities believes that the outlook should improve led by seasonality and incremental gains from China, which should support stock prices of logistics majors including Concor.
The brokerage has a 'buy' rating on the stock. In addition to the management guidance, demand continues to pick up ahead of seasonally strong quarters and in the medium to long-term, Concor remains a good way to play the dedicated freight corridor and ‘Make in India’ themes, says the brokerage.
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