Container Corp. - Commissioning Of DFC To Drive The Containerized Cargo Movement: Motilal Oswal

Motilal Oswal Report

Container Corporation Of India Ltd. will be a key beneficiary of the Dedicated Freight Corridor, which is likely to result in volume growth driven by a modal shift and enhanced operating efficiencies. The DFC connecting Dadri to Mundra became operational in May 2023. Container Corp is operating a timetable of trains on this route, and this development has led to a significant shift in the proportion of its business from road to rail. 

Further, we anticipate that Container Corp would benefit from the shift in northern hinterland volumes from Gujarat ports to JNPT after the entire DFC commissioning, which is likely to be completed in FY26. Container Corp’s strong positioning at JNPT (~55% market share in 9M FY24) could result in tailwinds from operating efficiencies stemming from DFC and the ability to offer full-fledged scheduled services.

Domestic container volumes for Container Corp grew 11% YoY in 9M FY24, while EXIM volumes rose 6% YoY during the same period. Weak trade volumes due to the geopolitical headwinds hit EXIM volumes.

We expect domestic operations to scale up (35% contribution in 9M FY24) due to the addition of new services/ commodities for multiple sectors, and a strong network of terminals. Further, strategic initiatives such as addition of FMCG-led cargo, deployment of LNG trucks, partnerships for solar energy products, etc., are likely to result in higher double-digit growth for domestic cargo.

With DFC commissioning and a continuous ramp-up in the number of doublestacked trains, we expect blended volumes to report 10% compound annual growth rate during FY24-26.

Further, with clarity on land license fee provisioning, we project the Ebitda margin to be 23- 25% over FY24-26. The stock trades at 16.9 times FY26E enterprise /Ebitda. Reiterate Buy with a target price of Rs 1,120 (based on 22 times EV/Ebitda on FY26E).

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