We believe that Container Corp (Concor) has the potential to double over the next three years, driven by a strong 26% volume CAGR over FY21E-25E. Expected commencement of the DFC (Gujarat port connectivity expected by March 21 and JNPT later in 2022) would be the key driver. FY21 profits are impacted due to the LLF issue, but we expect a gradual normalisation of EBITDA/TEU by FY25E. Potential privatisation can be the additional upside.
DFC trial runs done on 965 km. Project envisioned in FY06 should commence operations FY22E onwards, after a long wait. Western DFC (WDFC) connects Mumbai-Delhi and Gujarat-Delhi over 1,504 km. Eastern DFC (EDFC) connects Howrah-Ludhiana over 1,856 km. Globally, rail carries over 40% of traffic in most developed countries, which is just 30% in India. Priority for timely passenger trains over freight led to unreliable delivery schedules and rail lost share from 50%+ in the 90s to 30% currently. DFC, with dedicated time scheduled freight trains, should see this trend reverse.
Concor’s volume spurt has been driven by shift to rail from road. Rail is more cost-efficient than road over 330 km at current fuel prices. DFC will make rail more time-efficient 430 km onwards vs. 580 km currently. JNPT, Mundra and Pipavav ports are 80% of Concor’s EXIM volumes. Mundra and Pipavav have over 70% of cargo moving to the NCR region, which is 1,200 km distance. JNPT has nearly half the cargo moving over a sizeable distance. Rail cargo movement should rise from Mundra’s and JNPT’s 35% and 30%, respectively, to 70% and 50%, respectively, post WDFC commissioning. We believe Concor’s volumes will rise at 31% CAGR from FY21E-23E, driven by Mundra and Pipavav Port and by 21% CAGR from FY23E-25E with JNPT contribution. 20% change in LLF is 8% chg in PT. Concor’s privatisation move has led to LLF changes to bring it on a par with market rates. 1QFY21 results disappointed as LLF demand of railways indicated Rs 9 billion LLF vs management’s 4QFY20 estimate of Rs 4.5 billion.