Why Concor is stock pick of the week

The pandemic has affected the logistics industry badly. Just like other logistic companies, Container Corporation (Concor) also reported a weak set of numbers for the first quarter of 2020-21. Its revenue and net profit for the quarter fell by 27% and 73% respectively y-o-y. The company is expected to report weak numbers in the second quarter too since the export – import (Exim) rail cargo transport is still down y-o-y. However, analysts see a bottoming out trend here, as the 8% fall in August was significantly lower than the 21% y-o-y cut reported in June. Concor’s volumes are expected to get normal from the third quarter and this can be the first trigger for the counter.To overcome short term difficulties and improve margins, the management is taking several steps. It wants to improve its realisation per transaction by offering a complete logistics package to its customers. In addition to providing first mile – last mile logistics in all its terminals, Concor also plans to build mobile applications to facilitate customer tie-up. Avoiding bidding for low margin short distance cargo movement is another margin boosting measure.With unmatched presence across the country, Concor will be a direct play on the upcoming large rail freight infrastructure project, Dedicated Freight Corridor (DFC). Though DFC’s completion date is pushed back from December 2021 to June 2022, due to Covid induced disturbances, this Rs 81,000 crore project will boost Concor’s revenues. DFC will improve train’s turnaround times and will help rail logistic players like Concor to gain market share against the road players.The company is also on the privatisation list and any action by the government on this front can be the next long term trigger for the counter. While cost efficiencies brought in by new private management are expected to improve its fundamentals further, privatisation can also bring in re-rating due to sentiment changes. However, as a precursor for privatisation, Indian Railway has increased land licence fees by more than five times and this will increase the cost burden of Concor.Investors can ignore its high trailing PE, which is placed at 102.11 now, as the entire logistic industry is reporting losses or very low profits. PE ratio based on 2021-22 earnings, on the other hand, can be a good valuation tool – Concor’s PE is placed only at 12.23 times. This is reasonable for a company that is expected to report 25% plus annualised volume growth in the next few years, between 20021-22 and 2024-25 – due to the commissioning of DFC. 78331024 78331034 Selection methodologyWe pick up the stock that has shown the maximum increase in “consensus analyst rating” during the last 1 month. Consensus rating is arrived at by averaging all analyst recommendations after attributing weights to each of them (ie 5 for strong buy, 4 for buy, 3 for hold, 2 for sell and 1 for strong sell) and any improvement in consensus analyst rating indicates that the analysts are getting more bullish on the stock. To make sure that we pick only companies with decent analyst coverage, this search will be restricted to stocks with at least 10 analysts covering it.(Graphics by Abdul Shafiq/ET Prime)

from Economic Times https://ift.tt/3mX5342