Not RVNL Or IRFC, But This Railway Stock Trading Below Rs 900 Is Recommended To Buy; 25% Upside Seen

In March month so far, a majoriy of railway stocks have witnessed sharp correction due to regulatory scrutiny over investment in midcaps and smallcaps. However, railway stocks have been undergoing periodic pullbacks since their Q3FY24 results announcement. When we talk about railway stocks, some of the very renowned names would be IRFC and RVNL.

These two stocks are multi-baggers and star performers of 2023. However, as the market sees a volatile situation, there is one railway stock which is in the business of providing logistic solutions, which is an attractive bet.

It is none other than Container Corporation of India Ltd (Concor) in the midcap basket. Where IRFC and RVNL have recorded yearly gains of a whopping 407% and 291% on BSE as of now, Concor has only seen a double-digit surge of nearly 46%. And the latest pullbacks in midcap, only make Concor a piping hot bet for fetching long-term gains.

On BSE, Concor stood at Rs 867 apiece, broadly flat on March 15 with a market cap of Rs 52,825.82 crore. Currently, Concor is trading lower by 16.3% from its 52-week high levels of Rs 1,035.45, while it is up by 56.21% from its 52-week lows of Rs 555 apiece.

So there is potential in Concor.

As per Incred Equities latest research report, the key triggers for Concor in the coming months will be a strong surge in rail container cargo at three major ports, coupled with an outlook for robust sales, and Dadri-to-Rewari stretch of the Indian Railways Dedicated Freight Corridor.

Incred expects the proportion of rail container cargo at the three ports (JNPT, Mundra and Pipavav or GPPV) to rise from 25% (FY23) to 36% (FY26F). It said Concor is well-placed to benefit as 81% of its FY23 originating EXIM cargo is from JNPT, Mundra and GPPV combined.

Further, Incred has factored in sales/originating cargo/ EBITDA growth at 51%/ 47%/ 61%, respectively, over FY24F-26F.

Also, the brokerage pointed out that Indian Railways' EXIM (export-import) container cargo rose by 25% yoy in Aug-Oct 2023 (vs. 3.7% yoy growth in 1QFY24). Incred believes this is due to the commissioning of the Dadri-to-Rewari stretch of the Indian Railways Dedicated Freight Corridor or DFC in May 2023. This augurs well for Concor.

Incred believes that the bull case argument has not been factored in by the street. It added, "Post DFC commencement, we believe rail wagons will be able to handle 4x volume vs. now due to double-stacking and quicker speed (vs. ~20kmph currently)."

Accordingly, Incred added, "We have an ADD rating on the stock with a target price of Rs.1,083 (18x FY26F EV/EBITDA, in line with last five year's average)."

Concor is among the dividend paying railway stocks. Last month, the company's share turned ex-dividend for a payout of 80% amounting to Rs 4 per share. Also, in 2023, the company paid up to 220% valuing it at Rs 11 per share. At the current market price, Concor has a dividend yield of 1.3%.

CONCOR is committed to providing responsive, cost-effective, efficient and reliable logistics solutions to its customers. It strives to be the first choice for its customers. CONCOR is a customer-focused, performance-driven, result-oriented organization, focused on providing value for money to its customers.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.