FREE

Sector update: Logistics - Exim container volumes see traction, while port volumes muted

Container rail volume saw muted growth in Dec-19 at 3.8% yoy: to 5.17m tons led by 3.5% yoy growth in exim volumes to 4.17m tons and 5.3% yoy growth in domestic volume to 1m tons.

For 3QFY20 container volumes grew by 5% yoy to 14.9mt (YTD-20: +2.6% yoy to 45.83m tons) led by 6.9% yoy in exim to 12.1mt (YTD-20: +3.9% yoy to 37.34m tons) while domestic declined by 2% yoy to 2.8mt (YTD-20: -2.9% yoy to 8.49m tons). Note that rail data is in tonnage and growth could vary in TEU terms for Container Corporation of India (Concor) & Gateway Distriparks (GDL).

Major port container volumes see 2.1% yoy decline: to 831,000 TEUs for Dec-19 and 3% yoy decline for 3QFY20 to 2.4mn TEUs (+2.7% yoy to 7.54mn TEUs for YTD-FY20). JNPT volumes fell by 6.3% yoy to 418,000 TEUs in Dec-19 (3Q20 -6.7% yoy to 1.21mn TEUS; YTD FY20 -1% yoy to 3.78mn TEUs). The decline was largely led by weak exim trade. While share of DPD volumes at JNPT was at 51.8% in Nov-19, share of DPD volumes delivered directly to consignees at JNPT was at 6.9% in Nov-19.

Lead distance deteriorates: with exim at 749kms (780-800kms last few months; -1km mom; -33km yoy) in Nov-19 and domestic lead distance were at 1,225kms (reduced by 43kms yoy and +27kms mom).

While container rail volumes have improved in 3QFY20 in exim segment (+7% yoy), the port volumes remain muted reflecting weak exim trade. The contradiction is likely due to variance in tons vs TEUs, growth in minor port volumes or increase in rail share. Improvement in exim trade and thereby port volumes is important for sustainability of rail volumes. Overall, we maintain our positive stance on the space on long term volume trajectory and likely market share gains by rail once DFC is operational in 2HFY21. However, considering the near term weakness in earnings and rich valuations, we have a Neutral rating on Concor (28x FY21E earnings), while continue to have a preference towards GDL (attractive valuations at 12x FY21E earnings and 5x EV/EBITDA).