Concor: Stock pulse
05-10-2023

Stock pulse is a format where we explore the most important questions to understand the company's performance.

What are the revenue drivers for the company and future outlook?

Concor earns revenue from operating in 2 major segments – domestic and EXIM (Export-Import). Domestic revenues ramped up swiftly to Rs 29 bn (volume increased 19% YoY to 0.95 mn TEUs-20 ft equivalent units, and realization grew 5% YoY). EXIM revenue grew to Rs 52 bn (volume growth of 4% YoY to 3.4 mn TEUs while realization declined 5% YoY). Management indicated domestic revenues to keep on growing in a similar manner (on back of 10-12% volume growth) while EXIM revenues may be under pressure. DFC connectivity from Dadri to Mundra and Pipavav as well as JNPT (due next year), double stacking, and value-added services like warehousing to aid revenues going ahead. 

Can the company continue to maintain its margin profile?

The margin profile is different for both the segments. EXIM volumes are on behalf of shipping lines and have lower empty running hence better margins. Domestic margins on the other hand are squeezed due to empty running costs. To improve margins Concor has been working on providing value-added services in the form of first-mile, last-mile deliveries, business support solutions, and distribution logistics. While margins may fluctuate over shorter time periods, the company has shown resilience in maintaining a margin profile over a 3/5/10 year period at ~16% by taking appropriate price hikes and increasing efficiency.   

What are the Capex plans for FY24? How does Concor plan to scale up its operations?

Management guided capex of ~Rs 6 bn (Rs 5.7 bn in FY23), out of which Rs 2 bn will be for acquisition of wagons and Rs 2 bn for containers (~5000 to be added over the year) as well as Rs 1.5 bn for developing terminals. Increase in capacity will solve container availability problem and will help Concor scale up its operations.   

How does the company allocate its profit? What is Concor’s dividend payout policy?

As per the guidelines issued by the Department of Investment and Public Asset Management (DIPAM) the minimum dividend to be paid for the year should be at least 5% of net worth or 30% of profit after tax, whichever is higher. Concor has a healthy balance sheet and has been consistently paying out dividends and is debt-free.

What are the concern areas?

Concor’s 60%+ revenue is from the EXIM segment, continuing uncertain global economic environment poses a risk to international trade. Also, EXIM trade is over-dependent on a single rail corridor. Large dependence on Railways as a transporter leaves it vulnerable to increases in haulage charges & policy changes. Additionally, land acquisition for developing new routes is a significant constraint. Concor has navigated all these challenges and has emerged from them unscathed.