Logistics stocks zoom on re-rating hopes

Shares of Transport and logistics companies such as Blue Dart Express, Transport Corporation of India, Gati, Allcargo Logistics, Patel Integrated Logistics, Snowman Logistics and Container Corporation of India have surged on the back of expectation of re-rating of the sector. Most of the shares have hit record highs in Monday’s trade and hit the upper limit.

Analysts tracking the sector said after Jeff Bezos of Amazon Inc and SoftBank Corp CEO Masayoshi Son evinced interest in e-commerce space, investors are now betting big on firms that could deliver goods.

Harish Vasudevan, Strategist, SVS Securities, said the fall in diesel price and blockbuster sale of $9.3 billion in single day by Chinese major Alibaba acted as a major trigger for the rise. According to him, the day is not far off for domestic online majors to catch up with Alibaba.

Before that happens, investors will look for deliverable companies which have pan India presence, as despite India’s huge Internet population, e-commerce infrastructure remains relatively underdeveloped and ripe for huge growth.

According to analysts, these firms are already raking in huge earnings, which are reflected in the September quarter results. For instance, Gati, in which Janpan’s Kintetsu World Express owns 4.96 per cent, reported a consolidated net profit of ₹12.49 crore against ₹5.76 crore it reported a year ago, clocking a growth of 117 per cent. Consolidated income improved to ₹414.91 crore (₹366.93 crore).

Similarly, Allcargo Logistics reported a growth of 51 per cent in consolidate net profit for the quarter ended September against the comparable period last fiscal while consolidated revenue jumped 37 per cent to ₹1,476 crore.

Already Gati, Transport Corporation of India and Blue Dart Express have seen a steady increase in foreign investors investment this fiscal. However, Concor saw a decline in FIIs interest while Patel Integrated yet to attract institutional investments.

Global fund major Nomura has estimated that India’s e-commerce industry could more than quadruple to $43 billion over the next five years, driven by online retail.

Motilal Investments in an analysis said: “While 50-60 per cent of the delivery logistics today are handled by the large e-tailers themselves, this proportion may reduce as the proportion of sales to lower-tier cities increases and e-tailers’ focus on bottomline picks up. Delivery costs a platform owner 8-10 per cent, implying significant burn for firms today. Segments such as logistics, warehousing and payment gateways stand to benefit directly.”

According to Harish Vasudevan, the impending Goods and Service Tax (GST) Bill and expected general economic growth will further aid the sentiment in favour of the sector. GST would bring in stable tax regime and reduce carrying and forwarding agency costs for the logistics companies, he added.