An exceptionally weak quarter provides opportunities
Container Corporation of India (Concor) stood out in Q1FY21 on the back of respectable volume performance. Domestic and EXIM rail container volumes for Concor declined 25% and 20% YoY, respectively. EBITDA declined 27% YoY after factoring in the possible increase in land license fee. Container volumes (EXIM) in 12 major ports decline 32.2% YoY with JNPT declining 35%, thereby, making Mundra the largest container port in India – Mundra exim container volumes dropped 18% YoY. This has not lead to any meaningful market share loss for Concor. Road transporters/3PL players have witnessed 46-76% YoY decline in revenues as Apr, ’20 volumes were virtually non-existent. Allcargo Logistics’ topline performance, driven by the multi-modal transport operator (MTO) segment, is expected to be best in the pack, while 35-40% decline in CFS volumes impact profitability. We maintain BUY on TCI Express, Concor and VRL Logistics (VRL).
* Trucking has been worst hit; utilisation has recovered to 75/80% in July. April and May have seen negligible volumes for trucking, while June utilisation improved reaching 50-60%. Current industry utilisation is 75-80%. Leveraged asset-heavy players continue to face meaningful distress and we expect truck possession to see a sharp spike once the moratorium on EMI payments end in Sept, 2020. In this pandemic hit Q1FY21, two trends were clear – increasing share of rails even in EXIM container trade and relatively better positioning of stronger balance sheet organised sector road transporter. Both the trends are structural and will accentuate with the advent of DFC and determine our rating rationale on Concor, TCI Ex and VRL.
* Concor. Concor is the only company in our coverage universe reporting profit in Q1FY21. Clarity on land license fee should be obtained in Q1FY21 result – management has guided for a revised LLF of Rs4.5bn p.a. Concor’s coastal shipping operations were closed in Q1FY21. PAT is expected to decline 39% YoY to reach Rs1.4bn.
* Allcargo. MTO business enjoys the buoyancy of global container trade in Q1FY21 and we expect near flat volumes in the same. Since ~90% of Allcargo’s topline is on account of MTO operations, the topline performance of Allcargo appears exceptionally strong. CFS business is expected to witness a 30% YoY drop in volumes. While logistics park business was ramping up nicely reaching Rs108mn revenue runrate in Q4FY20, Q1FY21 will see a reset as there has been a significant reset in rentals all around driven by sharp decline in demand of grade A warehousing space. Managing leverage shouldn’t be a problem in H1FY21 for Allcargo.
* TCI Express. We expect 61% YoY decline in topline due to disrupted operations in April and a slow pickup in May, ’20. While the management has earlier guided for an EBITDA breakeven in Q1FY21, we do factor in Rs70mn of negative EBITDA.
* Mahindra Logistics. We expect topline to decline by 46% YoY with auto revenue declining ~60% YoY. We expect warehousing revenue to decline 40% YoY, thus, breaking the 8-quarter-long trend of high double-digit revenue growth.
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