Container Corp Of India Could Lose Rail Market Share, Says Kotak Securities

Kotak Securities Ltd. maintained a 'sell' rating on Container Corp. of India as it expects the company to continue losing rail market share. Container Corp.'s pricing is at a premium to peers, according to the brokerage.

The brokerage has a target price of Rs 740 per share, implying a 29% downside to the previous closing price.

Container Corp.'s pricing is at 5% premium to that of peers like Gateway Distriparks Ltd., according to Kotak's assessment of rail freight rates effective from July 1.

The company has to pay a 7% land lease factor as it does not own land, whereas peers do not have to bear this cost, it noted. This means it might be losing out on pricing competitiveness, the brokerage said.

However, Container Corp. is making up for it by focusing on service and logistics, and expanding its service offerings, Kotak said.

Kotak Securities expects Container Corp. to continue to lose market share. As per data, the rail market share of the company has been consistently declining since 2021.

In 2014, the company's rail market share, including EXIM and domestic, stood at 76%, compared to 58% in 2024.

Haulage cost spikes and hike in land licence fees have impacted margins of Container Corp. over the years, bringing them down from peak levels, Kotak noted.

Deferral in the stake divestment process of Container Corp, may lower interest for certain bidders, according to the brokerage.

It highlighted recent unconfirmed news flow that suggested that the Railway Ministry might defer the divestment of its stake in the company beyond fiscal 2025.

The deferment and loss in market share could make the company less attractive for peers, according to it.