Competitive pressures may cap upsides for Container Corporation of India

Pricing challenges, muted domestic growth offset gains in exim volumes

The stock of Container Corporation of India (Concor) has fallen nearly 13 per cent over the past three months, weighed down by muted operating performance in the June quarter, market-share losses, and pricing pressures. Several brokerages have downgraded the stock or maintained a sell rating, with target prices in the range of ₹500-530 — suggesting further downside from current levels.

 

While the company’s June-quarter operating performance fell short of estimates, the company has maintained its growth guidance for FY26. It expects export-import (exim) volumes to grow 10 per cent and the domestic business to rise 13 per cent. In the June quarter, exim volumes grew 10 per cent year-on-year, but the domestic segment declined.

 

Market-share erosion remains a major concern for investors. In the June quarter, Concor’s share in the exim segment fell by 200 basis points. Since Q1FY20, the company has ceded nearly 10 percentage points of market share. 

 

Analysts led by Aditya Mongia note that Concor has managed to arrest, and in some cases partly reverse, market-share losses at JNPT and Pipavav. However, the company continues to cede ground at Mundra, attributing the decline to its decision of not pursuing low margin volumes. Kotak Securities points out that Adani Logistics’ comparable business is steadily gaining share and now likely operates at a low to mid-20s operating profit margin — not far from Concor’s 28-29 per cent.

 

The brokerage has lowered its operating profit and earnings estimates by 6 per cent and 8 per cent, respectively, citing weaker conversion of handling volumes into originating volumes and reduced profitability in the domestic segment. It has also trimmed realisation assumptions for both the exim and domestic businesses by 1-2 per cent. The brokerage has a sell rating on the stock.

 

JM Financial also flagged aggressive pricing by container train operators as a key factor eroding Concor’s market share and realisations. The company witnessed some losses in the exim market share at Mundra due to aggressive pricing by well-funded peers like Adani Logistics and DP World (DPW).

 

Analysts led by Priyankar Biswas of the brokerage believe this trend is likely to persist, as Adani and DPW focus on integrated end-to-end logistics. This, they note, is pressuring Concor’s pricing and margins, while also forcing the company to invest in low-margin trucking for first- and last-mile connectivity to defend its market share.

 

While Concor is expected to benefit from the modal shift from road to rail with the commissioning of the Western Dedicated Freight Corridor (WDFC), the extent of this shift may be overstated. Increasingly, exim containers at JNPT are being routed through non-WDFC corridors. At the same time, the anticipated transition away from road freight has not materialised, given the growing share of short-lead traffic and the rising competitiveness of trucking, aided by heavy capital expenditure on highways and expressways.

 

Though the stock is trading at reasonable valuations of 25 times its FY27 earnings, JM Financial has downgraded it to a “reduce” rating, citing a lack of near-term triggers.