After a minor slowdown in sales in February, demand was robust across the board in March for logistics companies, which are anticipated to report increased sales in the fourth quarter of fiscal year 2023. Analysts stated that despite this, their profitability could be hampered due to margin pressure.
A halt in interest rate increases aided the automobile industry’s recovery, which is likely to be a significant growth driver for logistics companies in the first quarter of 2023. Analysts predict the sector will benefit from an increase in rural demand.
According to Sharekhan by BNP Paribas, the logistics industry is anticipated to experience an increase in demand (revenue up 16.2 percent YoY), but pressure on operating margins (down 73 basis points YoY) will result in a neutral net profit YoY.
One basis point is equivalent to one hundredth of a percentage point.
In comparison to the minor deceleration observed in February 2023, demand was comparatively robust, according to Nuvama Institutional Equities.
E-way bill registrations increased by 16 percent year-over-year in March, signifying an all-time high, as reported by a prominent securities firm.
As evidenced by VRL Logistics’ recent fleet expansions, transporters’ profitability is near all-time highs due to stable freight rates and demand. In addition, rail container volumes increased by roughly 8% month-over-month.
Airports and Ports
Kotak Institutional Equities predicts that Adani Ports and the Special Economic Zone’s comparable volume growth will be in the low- to mid-single digits due to the country’s lacklustre demand.
The consolidation of the Andhra Pradesh port of Gangavaram resulted in a 15 percent increase in volume year-over-year. The securities firm anticipates a 21 percent and 11 percent year-over-year increase in container and total volumes at Gujarat Pipavav Port, respectively.
It has accounted for airport volumes at 95% of pre-Covid levels, implying a 2% QoQ increase in GMR Airports’ revenue.
After recording a 5 percent YoY increase in Q3 of FY23, port volumes remained on an upward trajectory with a 12 percent YoY increase to 135.7 MT in January-February.
According to Motilal Oswal Financial Services, this was due to a decline in commodity prices, the reopening of the Chinese market, and reduced freight rates.
ICICI Securities reported that volume growth in sectors such as fast-moving consumer goods (FMCG) and e-commerce showed limited momentum, while the automotive industry remained relatively stronger.
It anticipates a volume increase across surface express companies, but sequential profitability declines due to persistent cost pressure and insufficient absorption of recent price increases. It was stated that lower energy prices may not provide significant benefits.
In the March-ending quarter, Indian Railways’ monthly freight data indicates a volume increase of 8 percent quarter-over-quarter and 6.1 percent year-over-year. ICICI Securities anticipates Container Corporation of India to report growth comparable to its own.
Gateway Distriparks, Blue Dart
On the basis of monthly railway data and the opening of the Kashipur Inland Container Depot, Gateway Distribution’s volumes are also expected to increase. For surface express operators, ICICI Securities anticipates quarterly volume growth of 3 to 4 percent and margin stability for GATI, TCI Express, and VRL Logistics.
It is anticipated that Blue Dart Express’s cargo volume will increase to approximately 90 million. However, it anticipates year-over-year growth for all the companies, particularly GATI, whose focus on market share expansion will likely be reflected in the results.
ICICI Securities believes that participants’ margins will remain relatively stable. Earnings before interest, tax, depreciation, and amortisation (EBITDA) and throughput measured by twenty-foot-equivalent units (TEUs) are anticipated to remain stable compared to the previous quarter for Container Corporation and Gateway Distriparks, but to decline for Blue Dart Express.
The market will closely monitor the management’s commentary on price increases and their market assimilation, the extent of cost efficiencies realised from digitalization and automation, as well as the business outlook.