Multibagger logistic stock doubles investors wealth in 2 years. Should you buy?

Market


On BSE, Concor shares settled at 752.75 apiece up by 21.35 or 2.92%. The shares have hit a new all-time high of 771.40 apiece.

The logistics solution provider’s market valuation is around 45,864.63 crore.

Taking into consideration the company’s Friday closing price, the stock has gained by at least 12.5% this week. In a month, the shares have climbed over 9%. While in the past three months, Concor shares have rallied nearly 21%.

In two years, the stock has given more than 100% or a 2-folds jump. Whereas taking into consideration the new all-time high of 771.40 apiece, then the shares have skyrocketed by over 105% in two years.

Using the Axis Direct Return calculator, if an investor had infused 1 lakh in ConCor in September 2020, in the next 24 months, the value of the investment has doubled to more than 2 lakh. If the investment is around 5 lakh in September 2020, then the value has doubled to more than 10 lakh. The performance is calculated from September 10, 2020, to September 9, 2022. 

Concor shares were around 375.80 apiece on BSE on September 9, 2020.

Why did Concor shares rally?

The upsurge in Concor shares comes after the Union Cabinet earlier this week approved the policy on leasing railways land for Gati Shakti terminals, cutting the annual Land Licence Fee (LLF) to 1.5% (earlier 6%) of the market value of the land while also extending the term for up to a period of 35 years (earlier 5 years).

Further, the company has fixed September 22 as the record date for the final dividend for the financial year FY22. The shares will turn ex-dividend on September 20.

In May, the company announced a final dividend of 3 per equity share (60%) per equity share of the face value of 5 each for the financial year 2021-22. The final dividend is in addition to an interim dividend of 80% ( 4 per share) and a second interim dividend of 40% ( 2 per share) for the fiscal which has been already paid.

Should you invest in Concor shares?

Talking about the Gati Shakti policy, Achal Lohade and Paarth Gala analysts at JM Financial in their note said, “although this new policy will be applicable on new terminals, it provides existing entities an option to switch to the new regime post a transparent and competitive bidding process (most likely on revenue sharing parameter, similar to the Gati Shakti Cargo Policy) where the incumbent will possess the right of first refusal.”

The duo, however, also explained that there is no clarity yet about the recovery of the investments the incumbent operator has made in the infrastructure at those terminals. They added, “We keenly await the fine print, expected to be released within the next 90 days.”

On Concor, the analysts’ note said, “We broadly maintain our estimates at present and will revisit our LLF assumption only post clarity on the policy and Concor’s strategy on renewal of its terminals. We provide sensitivity to EPS and TP (a 1% lower LLF rate implies 5% increase in EPS and 3% increase in our TP). We introduce FY25 and roll forward to Sept’23TP of 860 (earlier Mar’23TP of 770). Buy stays. Key risks to recommendation are a) unfavourable outcome in the fine print of the policy and b) sub-par capital allocation decisions.”

Analysts at Anand Rathi in their report, stated that this new policy is applicable to new companies while old companies will have option to switch to the new policy regime after a transparent and competitive bidding process. This will benefit by creating 300Gati Shakti Cargo Terminals that will be developed over years and create 1.2Lakhs jobs. The complete details of the Biding parameters will be made available soon.

According to Anand Rathi’s note, if Concor switches to a new policy Regime, the following benefit will flow to the company:

– The LLF charges as paid by the company are 6% of the market value of the land, which will be further increased by 7% annually.

– During1QFY23 the company paid 95.59 crore as LLF charges. Annualizing the LLF charges the total charges for the years are ~ 382.36 crore.

– If Concor switches to a new policy Regime, it will pay 1.5% as LLF charges which comes to~ 95.59 crore for FY23.

– Considering the above calculation the saving in LLF charges because of this policy adoption will be ~ 286.77 Cr (pretax) which entails FY23 EPS rise to the tune of ~15%annually.

On the valuation, Anand Rathi’s note said, ” We continue to remain positive on the stock, as changes in LLF policy opens opportunity for privatization and expect growth momentum to continue in the medium to long term supported by DFCled growth, CAPEX plans and positive growth outlook from domestic vertical,” adding, “We maintain BUY rating on the stock with a revised target price of Rs. 820 per share.”

 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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