Concor's Volumes Won't Be Hurt Much By Railways Haulage Hike, Says Jefferies
A shift from road to rail, and market share or margin recovery will likely drive the stock, it says.
The 10% hike in haulage charge by the Indian Railways will have a limited impact on Container Corp.'s volumes and cost passthrough over the next one–two months, according to Jefferies Financial Group Inc.
The hike is effective from Oct. 1 to June 30, 2024, the brokerage said in a report on Monday. It has a 'buy' rating on the stock with a target price of Rs 825, implying an upside of 15% as compared to Friday's closing price.
The general commentary, particularly on dedicated freight corridors, has been to encourage volumes and to eventually try and pass on cost efficiency to end customers in tariffs. Instead, a 10% busy-season charge has been levied, according to Jefferies.
Given the rail-coefficient improvement, higher industry volumes should see rail logistics companies like Concor and Gateway Distriparks Ltd. eventually pass on this haulage hike to consumers, it said.
However, it is expected to take one–two months, implying that the potential positive margin surprise resulting from volume growth may become apparent only from the fourth quarter, according to the brokerage.
A shift from road to rail, and market share or margin recovery will likely drive the upward movement in the stock. However, the downside risks for the stock are indefinite delay in the DFCs, and railways bringing up land licence fees, it said
Shares of Concor was trading 0.13% lower at Rs 715.25 apiece compared with a 0.44% decline in the benchmark NSE Nifty 50 at 1.15 p.m. The stock had risen 3.45% to an intra-day high of Rs 719.65 per share.
Thirteen out of the 26 analysts tracking Concor maintain a 'buy' rating on the stock, eight recommend 'hold' and five suggest 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 4.8%.
