Shares of Snowman Logistics continued their northward journey and hit a 52-week high of Rs 63, up 10 per cent, on the BSE in the intra-day trade on Thursday on favourable demand prospects. In the past eight trading days, the stock of the logistic company has rallied 77 per cent from a level of Rs 35.60 hit on November 9, 2020.
At 02:30 pm, Snowman Logistics was trading 7 per cent higher at Rs 61.50 as compared to a 1.3 per cent-decline in the S&P BSE Sensex. Trading volumes on the counter more-than-doubled with a combined 8.04 million shares changing hands on the NSE and BSE till the time of writing of this report.
According to India Ratings & Research (Ind-Ra), there has been a growing demand for single-point end-to-end cold chain services by large multinational companies. This has led to the emergence of organised private players such as Snowman Logistics. Moreover, there is an increasing demand for temperature-controlled services by the food industry due to increasing urbanisation and changing consumer consumption patterns.
Also, some of its regular customers such as McCain Foods (India) Private Limited, Ferrero India Pvt. Ltd., and Hindustan Unilever Limited have to maintain high standards with independent audit and inspection, due to which the dependency on the organised players is high, it said in a report.
Furthermore, to cater to the increasing demand for e-commerce logistics in the food and pharmaceutical sector, the company has created a separate vertical in FY21. Ind-Ra expects the company to benefit from increasing presence of quick service restaurants and demand for newer avenues such as pharma and healthcare sectors after the outbreak of Covid-19.
The rating agency has affirmed Snowman Logistics' long-term issuer rating at 'IND A' while resolving the rating watch evolving (RWE) with stable outlook.
In April-June quarter (Q1FY21), the company's occupancy levels were at an all-time high of 89 per cent, resulting in strong revenue growth and robust margins in the warehousing segment in April-September period (H1FY21). However, the shortage of drivers in the first few months of FY21 impacted the revenue and margins in Q1FY21 which have recovered in Q2FY21.
The EBITDA (earnings before interest, taxes, depreciation, and amortization) margins remained strong at 28 per cent in H1FY21 as against 26 per cent in H1FY20. With the company's focus on capacity expansion (an addition of 12,000 pallets over the next one year); setting up of dedicated facilities for e-commerce players such as Amazon where the revenue model is cost-plus and capex is also reimbursed; increasing focus on margin-accretive segments such as pharmaceuticals, the agency expects Snowman Logistics' business profile to improve and the financial profile to remain strong in the medium term. CLICK HERE TO READ FULL REPORT