Logistics shares gain on infrastructure status; Gati, VRL hit 52-week highs

Gatway Distriparks, Gati, Sical Logistics, VRL Logistics, Transport Corporation of India, Lancer Container Lines, Allcargo Logistics and Mahindra Logistics were up in the range of 2% to 6% on the BSE.

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. 

“Companies with significant debt on their books will be at an advantage, as they will now be able to get credit at an attractive rate. The cost of funding, as reports suggest, will come down by up to 50 basis points (bps). That apart, there is no meaningful change in the other business metrics for now,” explains A K Prabhakar, head of research at IDBI Capital

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 status.

“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.

 

COMPANY	LATEST	PREV CLOSE	GAIN(%)
LANCER CONTAINE.	144.70	137.00	5.6
GATEWAY DISTR.	271.00	260.15	4.2
ABC INDIA	95.40	92.05	3.6
SICAL LOGISTICS	229.25	221.45	3.5
TRANSPORT CORP.	300.90	291.80	3.1
JITF INFRA LOGIS	53.00	51.50	2.9
TIGER LOGISTICS	190.95	186.20	2.6
VRL LOGISTICS	402.25	392.55	2.5
ALLCARGO LOGIST.	172.65	168.70	2.3
CHART.LOGISTICS	19.80	19.35	2.3
GATI	143.65	140.65	2.1
PATEL INTEGRATED	92.00	90.10	2.1
MAHINDRA LOGIS.	424.55	418.10	1.5