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Sector update: Logistics - EXIM sees uptick

Container rail volume picked up in Oct-19 by 4.2% yoy: to 4.95m tons led by sharp increase of 8.2% yoy in EXIM volumes to 4.07m tons, while this was partially offset by 11% yoy decline in domestic volumes to 0.88m tons.

YTD-FY20 volumes grew 1.8% yoy 35.86m tons led by 3.2% yoy growth in Exim (29.28m tons), partially offset by 4.4% yoy decline in domestic (6.58m tons). Note that rail data is in tonnage and growth could vary in TEU terms for Container Corporation of India (Concor) & Gateway Distriparks (GDL).

Port volumes see decline of 2.2% yoy: Container volumes growth at major ports saw decline of 2.2% yoy to 800,000 TEUs for Oct-19 and 4.5% yoy increase for YTD-FY20 to 5.94mn TEUs. JNPT volumes fell by 4.7% yoy to 402,000 TEUs in Oct-19 (YTD FY20 +1.1% yoy to 2.98mn TEUs). The decline was largely led by weak exim trade.

EXIM Lead distance deteriorates with exim at 757kms (780-800kms last few months; -17km mom; -37km yoy) in Oct-19 while domestic lead distance increased by 63kms mom and decreased 55kms yoy to 1,232km.

While Container rail volumes improved in Oct-19, port volume data remained muted. Moreover, container rail volumes remain muted in YTD-20 in both exim and domestic segments led by sustained weakness in macro trade. We believe the weakness is largely led by slower exim trade and economic slowdown across industries as reflected in muted GDP growth as also rail congestion impacting rail share. Overall, we maintain our positive stance on the space on long term volume trajectory and likely mkt share gains by rail once DFC is operational in FY21. However, considering the near term weakness in earnings and rich valuations, we have a Neutral rating on Concor (29.3x FY21E earnings), while continue to have a preference towards GDL (attractive valuations with our SoTP of Rs183