Dedicated Freight Corridor to boost Concor’s market share
The road-to-rail cargo shift is gaining momentum due to the Dedicated Freight Corridor (DFC), and Container Corporation of India (Concor) is expected to regain lost market share as its presence on the DFC network pays off.
Jefferies, a foreign brokerage firm, has raised its target price on Concor shares to Rs 825 from Rs 775, implying a potential upside of around 15% from the current levels.
The brokerage firm said the Dadri-Rewari stretch of the DFC was completed in the first quarter of fiscal year 2024. This stretch connects the western ports of Gujarat with the northern markets, and it is expected to significantly reduce the cost of transporting cargo by rail.
Jefferies noted that the DFC is transporting cargo at Rs 1.1 per tonne-kilometer (tkm) compared to Rs 1.4 and above by road. This, coupled with the fact that DFC trains are timetabled, which assures confirmed cargo delivery schedules, is making rail a more attractive option for shippers.
In addition, the DFC is being electrified, which will further reduce transit times. Trains are already electrified between Palanpur Junction and Dadri, and the last mile from Palanpur to Pipavav Port. The Palanpur to Mundra section is expected to be electrified by December 2023.
Concor has also placed orders for new rakes that can carry higher loads. This, along with its first mover advantage on the DFC network, will give the company an opportunity to regain market share at competitive prices.
Jefferies expects Concor’s volumes to grow at a CAGR of 15% in fiscal years 2023-26E with the DFC. The brokerage firm also believes that the company’s re-rating is on the cards.
Concor shares are down 3% on a year-to-date basis, while the one-year return stands at (-)6%. The company reported an over 17% decline in net profit for the first quarter ended June 30, 2023.
The DFC is a major infrastructure project that is expected to boost the Indian economy. It will help to reduce logistics costs, improve efficiency, and create jobs. Concor is well-positioned to benefit from the DFC, and its shares could be a good investment for investors who are looking for exposure to this growth story.
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