After COVID-19 volume derailment, investors bank on freight corridor to drive Concor growth


With the long-awaited freight corridor likely to improve volumes in the coming years, Container Corporation Ltd (Concor) may well be able to restart its engines. Concor stock, which had declined by around 33% in 2020 in 2020, picked up a bit when investors started to factor in volume gains from the dedicated freight corridor. It rose about 4.4% on Friday.

While freight volumes in FY21 will be on the slow track, trials have already started on parts of the dedicated freight corridor. Analysts believe that the increase in freight volumes in the coming years, as the corridor will make the rail more efficient for short distances less than 430 kilometers. Traffic from western ports to central India could increase.

“Rail freight movement is expected to drop from 35% and 30% to 70% and 50% from Mundra and JNPT, commissioning the dedicated post-west freight corridor. We believe Concor volumes will register a 31% CAGR over FY21-23, driven by the ports of Mundra and Pipavav, and a 21% CAGR over FY 23-25 ​​with input from JNPT, ”said Jefferies India analysts said in a note to clients.

Concor lost about eight percentage points year-on-year market share in FY20 in the export-import merchandise trade already in FY20. Overall volumes fell by 2 % year over year, which is another concern. The company also said volumes could contract by around 20% in FY21.

A recent change in the way Land Royalties (LLFs) are billed does not bode well for Concor either. The Ministry of Railways increased the demand for land license rights for fiscal year 21 to approximately 900. Concor estimated this to be in the region of 450 crore earlier. Due to the increase in fees, Concor divested approximately 15 terminals which generated approximately 4% of revenue. This could lead to cost savings, as volumes will change lines to nearby terminals.

Despite this, Concor will have to pass the LLF increase on to its customers through price increases. “The last 12 months have been impacted by COVID-19 and LLF. We believe that current price levels reflect low confidence in the increased volume associated with DFCs and the ability to pass on some of the higher LLF prices, ”said the Jefferies India report.

Capital expenditure plans are on track with approximately 500 crore, which is enough proof that the company is preparing for the hallway. Nevertheless, as covid-19 continues to rock the economy, it may be a long time before freight volumes actually increase. In addition, the freight corridor has already been delayed for a long time. Another concern is that volume expectations could be broken if part of the road-to-rail shift does not occur. This could derail the increase in stock.



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