Logistics - Q3FY12 Results Preview - Stable volumes, higher realisation to help CFS operators - Centrum

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Q3FY12 Results Preview

Logistics

Stable volumes, higher realisation to help CFS operators

With container volumes steady at the ports and CFS players’ ability to pass on higher rates and improve margins, we maintain our positive view on container based logistics players with a Buy rating on Gateway Distriparks (GDL) and Allcargo Global Logistics. We expect container volumes at 12 major ports to remain healthy and estimate a 10.2% volume growth (in TEU terms) to 8.3mn TEUs for FY12E and 10.0% growth to 9.1mn TEUs for FY13E. Transport Corporation of India (TCI) is riding on the growth in its supply chain and express logistics division, helping its revenue grow higher than that of the industry.

m  Container volumes stable: Container traffic at the 12 major ports remained stable during Q3FY12. Container volumes grew 3.5% YoY to 1.96mn TEUs during Oct-Dec 2011, as compared to 4.0% YTD FY12. Volumes at India’s largest container port JNPT also remained flat YoY at 1.1mn TEUs in Q3 as the port capacity was fully utilised.

m  Total port traffic down 4.7% YoY: Total port traffic remained lacklustre with a decline of 4.7% in Q3FY12 on the back of a drop in iron-ore and POL volumes. Iron ore volumes declined 30.4% YoY to 16.2mn tonnes while POL volumes fell 11.1% to 41.3mn tonnes in Q3.

m  EXIM trade too stable: India’s exports remained sluggish but its imports continued its robust growth during Q3. While exports grew just 6.9% YoY in value terms during Oct-Nov 2011, imports increased 36.0% YoY in the same period.

m  Domestic industrial activity: India’s Index of Industrial Production (IIP) however remained lacklustre and volatile with growth ranging between 3-4% and contracting in Oct. During Oct 2011 it contracted for the first time in 3 years by 4.7% YoY (new series) largely on account of decline of 6% in the manufacturing sector. However, during Nov it bounced back to 5.9%.

m  GDL and Allcargo - Top picks in the sector: Gateway Distriparks and Allcargo are our top picks in the logistics space. We have a Buy rating on both with a target of Rs190 and Rs242 respectively. We believe Concor is looking fully valued at the current level and maintain Hold with a target of Rs1,015. We also maintain our Buy rating on TCI (target price Rs109).