Recovery in freight volumes to help revival of logistics players

Sayan Das Sharma of BOBCAPS Research believes a sustained uptick in container volumes is beneficial for container logistics players such as Container Corporation and Gateway Distriparks
Port owners and container rail operators will be key beneficiaries of the recovery in freight volumes in September. While container freight carried by Indian Railways grew for the first time in six months, export-import (Exim) volume, too, posted a growth after eight months. 

Exim rail volumes at 4.3 million tonnes (mt) are highest since August last year. This is expected to sustain given the double-digit growth in container rail volumes in the first week of October. Sayan Das Sharma of BOBCAPS Research believes sustained uptick in container volumes is beneficial for container logistics players such as Container Corporation and Gateway Distriparks.  

The other gainers will be port operators. Led by Chennai and Kandla, container volumes at ports were up 2 per cent over the year-ago quarter and 7 per cent on a sequential basis. Over cargo volumes, including bulk commodities, also rose sequentially by 4 per cent, while its year-on-year dip slowed to 2 per cent, from 10 per cent in August. Among listed players, Adani Ports and SEZ and Gujarat Pipavav would be key gainers.

The gains were not limited to rail freight and ports. Total e-way bills generated in September were up 10 per cent over the year-ago period to 57 million, the highest so far. This should help road logistics players, which have indicated that utilisation has reached 85-90 per cent of pre-Covid levels.


Among the rail container operators, higher volumes are expected to boost Concor’s utilisation across its network. While brokerages had earlier expected a volume decline over 25 per cent for the September quarter, given the improvement, these numbers are expected to be revised. Analysts at Jefferies expect the stock to rerate as volumes pick-up and there is progress on commissioning of the dedicated freight corridor. 


While they expect the stock to double over the next three years, the reason for its underperformance since August is the overhang related to the land licence fee. Worries of a higher outgo on this account could delay the divestment and privatisation efforts. 

Adani Ports, India’s largest private port operator, which recently concluded the acquisition of the Krishnapatnam Port in Andhra Pradesh, will be another gainer. Analysts at B&K Securities believe the company remains a structural growth story on exim trade and early connectivity to the dedicated freight corridor. With a string of ports on the east and west coast, it remains on course to hit the 500 mt target by FY25 registering a growth of 18 per cent. In addition to unwinding of pledges, more acquisitions could lead to higher balance sheet risk. 

Gujarat Pipavav Port, which recently hiked prices is another port operator, will also benefit. Linking of the dedicated freight corridor to ports in Gujarat as well as improved rail evacuation infrastructure should help the company. While it has announced plans to upgrade its facilities, the decision on extension of the concession period beyond 2028 will be critical for the stock trajectory. 
          
Gateway Distriparks, which recently restructured its operations, will be another gainer from higher port volumes, given its infrastructure across ports, inland container depots and cold chain facilities. The company will benefit from the commissioning of the Rewari-Palanpur section of the dedicated freight corridor in terms of volumes and cost efficiencies. In addition to this, JM Financial believes the stock is trading at inexpensive valuations.  



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