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Reduced transit times, price hike on horizon…

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 mil TeU, of which Exim volumes were at 83% of the mix with the rest contributed by domestic containers

Q2FY22 Results: The performance was on expected lines.

* Revenues grew 21% YoY to | 1824 crore, led by volume growth of 11%

* EBITDA margins expanded 256 bps YoY to 23.4%, mainly due to lower payment of land license fees (LLF) charges. Subsequently, absolute EBITDA grew 36% to | 427 crore

* PAT grew 41% YoY to | 264 crore, mainly on the back of a strong operational performance

What should investors do? Concor and CTOs in general are seeing their transit times declining between TKD/Dadri to Gujarat ports. Further, normalisation of DFC and | 1000/TeU pan-India price hike from October 1 are expected to further accelerate its topline (shift of cargo from road to rail) and bottomline growth.

* 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 | 810 i.e. 26x P/E on FY23E EPS

Key triggers for future price performance: Higher double stacking along with assured transit times will help Concor efficiently utilise its rolling stocks, improve dwell time of containers on ports and its terminals at reduced costs

* DFC is expected to normalise from Q3 onwards

* Apart from rail transportation service, Concor continues to explore business opportunities in areas like first mile, last mile service and distribution logistics

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

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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