Logistics stks price in most positives; no near-term upside seen: Analysts

Shares of logistics players saw a mixed response in trade on Monday after the government launched the national logistics policy (NLP) on Saturday.

Investors lapped up shares of Allcargo Logistics, Concor, VRL Logistics and Lancer Container, sending them 0.4-7 per cent higher. However, pressure mounted on shares of Snowman Logistics, Mahindra Logistics, and Delhivery. Shares of these companies declined up to 4 per cent.

The market reaction mirrors analysts’ mixed response to the NLP even though they expect the policy to benefit logistic players in the medium-to-long term. But they foresee no upside in the near-term.

Analysts at Jefferies, for instance, believe that the goods and services tax (GST) tailwinds under the new policy will benefit organised players. They remain bullish on the medium-term prospects of Concor, TCI Express, and Delhivery.

Over the weekend, the government launched the NLP, aimed at integrating and developing a technologically-enabled logistics ecosystem in India.

The new logistics policy aims to trim the costs to single digits, from 13-14 per cent of the GDP at present, by 2030. This would be in line with developed countries like the US and Germany, where logistics costs are in the range of 7 per cent to 9 per cent.

These costs, the government said, would be reduced through initiatives like Integration of Digital System (IDS), Unified Logistics Interface Platform, Ease of Logistics (ELOG), Network Planning Group (NPG), and System Improvement Group (SIG).

Analysts at JM Financial believe, with the launch of platforms like Unified Logistics Interface Platform and ELOG, the NLP could boost prospects for almost all segments in the logistics space.

“The policy stands to boost prospects of container train operators, road logistics players, warehousing players, express logistics companies, and air cargo companies. This is through reduction in costs and higher volumes or efficiency,” they wrote in a note. They had a ‘buy’ rating on Container Corporation (Concor) and Gateway Distriparks.

“Since cargo and goods movement often takes place via roads, the NLP shifts focus to other modes of transport like the railways as well. This would help arrest the road logistics costs and open avenues of transport through rails,” said AK Prabhakar, head of research, IDBI Capital.

Further, analysts expect NLP to help centralise existing and planned initiatives of various ministries under one centralised portal. It would amalgamate railways, roads, ports, waterways, airports, mass transport and logistics infrastructure under one shell.

That apart, analysts also expect the new regulation to spring leadership change within the logistics space. New players like Delhivery are expected to benefit from the NLP, they said.

Synergies from the new policy are already priced in, and analysts expect no upside in the near term.

“Logistics stocks have performed well in the recent past in anticipation of the new policy. But I do not see any further upside in the near-term as it is already priced in,” said Ambareesh Baliga, independent market analyst.

Shares of Aegis Logistics, Allcargo Logistics, Concor, and VRL Logistics have surged in the range of 2-50 per cent so far this calendar year, ACE Equity data shows. In comparison, Nifty50 and BSE Sensex gained two per cent each, during the same period.