A longer turnaround time in case of ports, demand shock impacting volumes, and supply chain disruption impacting last-mile delivery, are other challenges.
“Factoring in the demand shock and supply chain disruptions, we are cutting FY21E and FY22E volume growth for Adani Ports
to -2 per cent and 11 per cent, and for Gujarat Pipavav Ports
to -3 per cent and 11 per cent (earlier 10 per cent each), respectively,” said Edelweiss Research in its report.
In the December quarter, Gujarat Pipavav
took a hit in operating profit (sequentially), as its revenue declined alongside, while Adani Ports
witnessed a jump in both parameters during the period under review.
“In our view, bigger and multi-cargo ports are better off during a downtrend. Most ports of Adani are multi-cargo and bigger, which give it better control on traffic by offering discounts. Hence, we expect it to continue to outgrow the industry,” said Edelweiss.
Cargo-wise, India’s rapidly growing container trade (25 per cent mix) is likely to take a bigger knock on account of strong global inter-linkages in container movement.
Gujarat Pipavav’s volumes are likely to take a hit, with 85 per cent of its volumes being container-led. Nevertheless, its debt-free balance sheet and 8 per cent dividend yield lend comfort, said the Edelweiss report. The virus outbreak has stalled the continuous growth of cargo volumes, which registered positive growth from December 2019 to February 2020, and negative year-on-year growth of 2.01 per cent in March 2020 — dragged by a significant drop in container and liquid cargo volumes, said a CARE Ratings report.
In FY20, cargo handling at major ports grew a meagre 0.82 per cent, against 2.9 per cent achieved in the previous financial year. Container traffic is likely to face a slowdown from the automotive industry, and other container cargoes like white goods imports and granite exports segments in FY21, due to weak demand, said CARE Ratings.
In the logistics sector, rail freight services are on, but partial permanent demand loss is expected, given bookings are likely to reduce in April, said the latest Dolat Capital report.
Road freight operations, on the other hand, will see permanent demand loss on account of the disruption, it said. Players such as Mahindra Logistics, Allcargo, Future Supply Chain, and Rivigo have witnessed no cargo movement except for essentials and the segment is expected to take a revenue hit during this time period.