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Logistics Sector
Port volumes
Iron ore volumes weigh on port throughput:Traffic at India’s
12 major ports grew by a marginal 0.8% yoy during
April-November 2010 (-5.6% mom) on account of the 15.4%
yoy decline in iron ore volumes and moderate growth of 2.4%
yoy reported by the petroleum oil and lubricant (POL) products.
Iron ore exports have been declining since July 2010 post the
ban of exports by Karnataka from ten of its ports. In November
2010, iron ore exports were down 37.4% yoy and 38.0% qoq
at 4.0mn tonnes as against 6.3mn tonnes in November 2009
and 6.4mn tonnes in October 2010.
The ban by the Karnataka government directly impacted port
volumes where it is a principally handled commodity viz.
Mangalore (-13.1% yoy), Ennore (-12.3% yoy) and Paradip
(-2.2% yoy) during the period. However, the decline was
balanced by the 17.2% yoy and 13.2% yoy increase in fertiliser
volumes and container tonnage respectively, during the period.
Container volumes stabilising at higher levels: As per the Indian
Port Association (IPA) data for November 2010, container
volumes at 12 major ports registered a growth of 12.6% yoy,
but declined 3.0% on a mom basis. The JNPT port, which
handles around 61% of the country’s container volumes,
witnessed an increase of 9.4% yoy while posting 1.6% declineon
mom basis. The Chennai port, which handles around 16% of
the country’s container volumes, saw an increase of 21.3% yoy,
but a mom decline of 14.3%. The container data for FY2011
this far indicates that volumes have stabilised at higher levels
albeit on a low base. During April-November 2010, the major
ports handled 5.0mn TEUs v/s 4.4mn TEUs during the
corresponding period of last year, i.e. a yoy growth of 12.3%.
Going ahead, we expect the ports to sustain the monthly
run-rate and surpass the 7.0mn TEU mark set for FY2011.
Company-wise, we estimate Concor to post 10.0% growth in
Exim volumes in FY2011 as against management’s guidance
of 12%.
Outlook
We believe that sustained growth in the Indian economy with
GDP growth expected at 8.5% over the next few years, as well
as emergence of India as a global outsourcing hub will facilitate
the country’s container trade. In the current decade, container
traffic registered 12% CAGR compared to the 9% CAGR posted
by the total traffic at the major ports. We expect this trend to
continue and container traffic to register 11% CAGR over the
next five years, driven by the addition of new container terminals
and increased containerisation.
We prefer companies that provide a decent blend of growth
opportunities and are quoting at attractive valuations.
Accordingly, we maintain a Reduce on Concor as the company
is losing its pricing power in the high-margin Exim segment,
and is trading at expensive valuations. We maintain an Buy on
GDL and expect the company to register 14.1% CAGR in EPS
over FY2010–12 on account of being present at strategic
locations, its ongoing expansion plans and break-even in the
rail business at the PAT level. We maintain a Buy on AGL owing
to reasonable valuations and improved performance by ECU
Line over last few quarters.
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