Morgan Stanley upgraded Container Corp. of India Ltd., or Concor, to 'equal-weight' and raised the stock's target price, citing the company's benefit from the increase in the share of rail in India's freight modal mix. The brokerage expects the logistics solution provider to be a "strong beneficiary of volume growth" but noted that the margin benefits from double stacking could be passed along the channel.
The share of rail in India's freight modal mix is expected to increase from 29% last fiscal to 35% in fiscal 2031, the brokerage said in a note on May 7.
Morgan Stanley stated that a strong policy focus on rail is necessary to invest in and create three rail corridors, thereby increasing the share of rail in India's freight modal mix. Dedicated freight corridors would lead to more efficient movement of trains and also help improve wagon and container turnaround times, it said.
Container Corp.'s return on equity will improve, driven by stronger asset turns, the brokerage said. Volume growth would be driven by the commissioning of western DFC and continued strong growth momentum for domestic containers, the note said.
Based on this, the brokerage has raised the company's rating from 'underweight' to 'equal-weight' and raised the target price to Rs 1,076 per share from Rs 729 apiece earlier, implying an upside of 7% from its previous BSE closing.
On a bull case scenario, Morgan Stanley expects volume growth of 11% over the longer term with the rise in rail share in freight. Concor has a strong asset base—a good fleet of rakes and a good inventory of containers and terminals at strong locations, it said.
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