Shares of logistics
companies gained ground on Tuesday, rallying as much as 6% on the Bombay Stock Exchange (BSE) after the government awarded infrastructure
status to the sector, including those in cold chain and warehousing facilities.
Gateway Distriparks, Gati, Sical Logistics, VRL Logistics, Transport Corporation of India (TCI), Lancer Container Lines, Allcargo Logistics
and Mahindra Logistics
were up in the range of 2% to 6% on the BSE. Of these, Gati, VRL Logistics, Arshiya and Lancer Container Lines hit their respective 52-week highs on the BSE in intra-day trade. By comparison, the S&P BSE Sensex was up 0.31%.
Analysts have given a thumbs-up to the development and say getting infrastructure
status would help the companies in the sector get credit at competitive rates.
Meanwhile, according to rating agency ICRA, with a gradual improvement in most of economic indicators over the past couple of months, the outlook for the logistics
companies appears positive over the medium-term.
The Indian logistics
industry, ICRA says, is expected to grow at around 9-10% per annum over the medium-term. "While there have been fluctuations in the economy and freight demand due to Goods and Services Tax (GST) implementation, the impact of the same would be temporary and would be corrected over the near term," ICRA said in a release.
So should you invest in these stocks from a medium-to-long term perspective? Experts advise treading with caution given the rally in most of these counters since the past few sessions. They, however, remain upbeat on the sector from a long-term horizon.
Gati, for instance, has rallied 5% to Rs 149, extending its past two days’ 18% rally on the BSE after it reported a consolidated net profit of Rs 20.77 crore in September 2017 quarter (Q2FY18), up from Rs 7.44 crore in the previous corresponding period. The company recorded other income of Rs 28.37 crore, which include foreign currency exchange gain of Rs 8.41 crore for the quarter.
“One should look at the scale of operations and how sound the company's fundamentals are. At the current levels, I would prefer companies that have a global presence such as Blue Dart. That apart, I also like Gateway Distriparks,” Prabhakar says.
From a long-term perspective, however, analysts say the sector is likely to reap in benefits of implementation of the goods and services tax (GST) bill besides the gains from lower borrowing costs given the infrastructure
“We are positive on Transport Corporation of India (TCI) and Blue Dart. I expect the sector to see consolidation going ahead. Borrowing will be steeper where established larger players will have an upper hand in terms of market share. Positives of GST implementation will improve the earnings as well,” says Gaurang Shah, Head Investment Strategist at Geojit Financial Services.