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DFC leading to higher double stacking, assured transit times

About the stock: Concor is the dominant player in the CTO business (65% market share) with ~60 terminals.

* Revenue from rail transportation comprised 75% of total revenues (rest 4% by road, 13% via handling income, 2% warehousing and 4% others)

* Total volumes handled in FY21 were 3.6 million TeU, of which Exim volumes were at 83% of the mix with the rest contributed by domestic containers

Q3FY22 Results: In line performance on all fronts.

* Revenues grew 10% YoY to | 1920 crore, led by volume growth of 7%

* EBITDA margins expanded 253 bps YoY to 23.7%, mainly due to lower payment of land license fees (LLF) charges. EBITDA grew 23% to | 456 crore

* PAT grew 20% YoY to | 287 crore

What should investors do? With timely price hikes, commissioning of CPFS Swaroopganj and expected launch of three new terminals, Concor is expected to capitalise on the increasing volumes, by strengthening its infra and improving its EBIT per TeU (currently at ~| 3400 per TeU)

* We remain positive on the long term growth prospects of the stock and maintain our BUY recommendation

Target Price and Valuation: We value the stock at | 780 i.e. 21x P/E on FY24E EPS

Key triggers for future price performance: Concor expects to double its domestic volumes in medium term (via higher movement of bulk commodities). Also, higher double stacking with mixed trains along with assured transit times will help Concor efficiently utilise its rolling stocks

* Clarity on land policy by GoI is expected to facilitate Concor’s privatisation

* Technology introduction like flexi bag, dwarf containers (can also be triple stacked) would help Concor create opportunities in high volume markets such as bulk transport

* Diversification of services to help Concor retain pricing power over other plain vanilla players

Alternate Stock Idea: Apart from Concor, we remain positive on GDL

* Gateway Distriparks (GDL) has a diversified presence in logistics verticals like container train operators (70% of revenues), cold chain logistics, container freight stations

* We have a BUY rating on the stock, with a target price of | 350

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