Morgan Stanley's assessment of Container Corporation of India (CONCOR) stock has led to a notable 2% drop in its share price. The investment bank issued an 'Underweight' rating on the public sector undertaking (PSU) with a target price of ₹774 per share, pointing to concerns about the company's growth trajectory.
This target price suggests a potential downside of approximately 13% from its last closing price, sending ripples through the share market investment landscape.
CONCOR's stock performance in 2024
As of 9:32 am on October 14, CONCOR shares were trading at ₹879 on the National Stock Exchange (NSE). Despite its overall rise in 2024, the stock has underperformed when compared to broader market indices, increasing by around 2%, whereas the Nifty index has delivered a return of 14%. Over the past year, CONCOR's share price has grown by approximately 22%, compared to Nifty's 26% gain in the same period, reflecting its sluggish performance amidst other strong players in the share market investment sphere.
Q2 FY25 growth and analyst concerns
In Q2 FY25, CONCOR recorded a handling volume increase of 6%, which consisted of a 4% rise in Export-Import (Exim) volumes and a 14% increase in domestic volumes. However, Morgan Stanley's forecast for the quarter was higher than the actual growth achieved. The financial firm had expected CONCOR to report a 7% overall volume increase, with Exim volumes rising by 5% and domestic volumes surging by 20%.
Despite posting 6% volume growth in Q1 FY25, the missed estimates have cast doubts on the company's ability to meet its full-year targets. In earlier statements, CONCOR had set ambitious goals of a 15% rise in Exim volume and a 25% increase in domestic volumes for FY25. According to Morgan Stanley, the company now needs to realise 26% growth in Exim and 35% growth in domestic volumes in the second half of the fiscal year to meet these projections.
This outlook has led to concerns about CONCOR's ability to deliver on its promises, resulting in the 'Underweight' rating, which is causing some unease among investors involved in share market investments.
Coastal shipping and multi-modal logistics strategy
CONCOR continues to make strides in expanding its logistics capabilities, particularly through the development of coastal shipping services as part of its multi-modal logistics strategy. This initiative aims to provide customers with a more cost-effective, fast, and environmentally friendly mode of transportation. Coastal movement is expected to complement the company's existing services, which include terminal operations, warehousing, and the operation of Multi-Modal Logistics Parks (MMLP).
In an effort to streamline operations and offer enhanced customer service, CONCOR has also launched a logistics app to facilitate first- and last-mile connectivity. The company's focus on these critical links in the supply chain could play a pivotal role in its future growth prospects, offering new avenues for share market investment.
Financial performance and growth targets
The company's revenue from first-mile and last-mile services in Q1 FY25 stood at ₹82 crore, representing a robust year-on-year growth of 35%. For the full fiscal year, CONCOR has set an ambitious 50% growth target for these services. Such targets indicate the PSU's focus on expanding its operational footprint and strengthening its position in the logistics sector, which remains a significant factor in determining its share market investment appeal.
However, despite these growth initiatives, the concerns raised by Morgan Stanley regarding CONCOR's overall performance have overshadowed its positive developments. Investors are now watching closely to see if the company can achieve its targets in the coming quarters.
Final thoughts
The decline in CONCOR shares by 2% after Morgan Stanley issued an 'Underweight' rating highlights the challenges faced by the company in achieving its growth targets. With the logistics sector undergoing rapid changes, CONCOR's ability to meet its projections and enhance its operations will be closely watched by those involved in share market investment.
As the company continues to expand into new areas, such as coastal shipping and digital logistics services, it remains a key player in the PSU segment, albeit one facing heightened expectations and scrutiny from market analysts.
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