Analysts say hopes of a faster disinvestment process have helped fuel the rally, while there is also hope of a resolution to the contentious issue of land licensing fee being levied by the ministry of railways
The Container Corporation of India (Concor) stock has been on fire lately. From its January 2021 low of Rs396 on the NSE, the stock has rallied by around 50%. This compares with a mere 6% rise in benchmark index Nifty in the same period.
Analysts say hopes of a faster disinvestment process have helped fuel the rally, while there is also hope of a resolution to the contentious issue of land licensing fee being levied by the ministry of railways.
According to a media report, the railways' demand now stands at only Rs600 crore for FY21, much lower than earlier demand of around Rs1,300 crore. Based on this development, research house Macquarie has upgraded the stock to outperform from neutral, raising its target price to Rs685. The stock ended Friday's session at Rs587 on the NSE.
“The ministry of railways has sent a revised LLF policy to Cabinet committee for approval (LLF at 3% of industrial value vs. 6% earlier), but this is yet to be approved by the Cabinet," analysts at JM Financial Institutional Securities said in a 5 April note. They add that unless this is formally approved by teh cabinet, the issue is likely to remain an overhang over the stock.
It should be noted that the land licensing fee has been a key worry for Concor investors in the past year. The government has revised the LLF for the company from 1 April to a fixed charge, linked to market value of land, from a variable fee linked to volumes. Since then, it has been a roadblock in privatising the state-run company. A cut in LLF to 3% will also make it easier for the government to find a strategic investor, adding to the excitement around the stock. The company’s shares are now 20% higher compared to last August, before news of a 6% LFF levy had caused a sharp correction in the stock to the Rs360 levels.
Meanwhile, operating performance has been strong. The company’s export volumes grew 11% year-on-year (y-o-y) in the March quarter, while domestic volumes rose 21%. In a report dated 8 April, analysts at Nomura Inc said Concor's domestic volume growth was around 12% ahead of its estimates. Further, Concor’s FY21 volumes fell 3% y-o-y, this is better than management’s guidance of 5% decline. Apart from this, the company is also seen as a key beneficiary of the upcoming western dedicated freight corridor, analysts said.