IGI Logo

Exim trade continues to face increased volatility…

Q1FY22 saw a dip in logistics activity QoQ due to state-wide lockdowns (but unlike a pan-India lockdown in the YoY base quarter). Although on an MoM basis, domestic surface freight activity has largely normalised (95% in June), Exim container trade continues to face challenges with respect to backlog due to six day Suez blockage, rising manufacturing consumption in the West and container shortages in the east (container imbalance due to uneven macro trade) leading to higher export charges. Inventory delays for manufacturing companies are expected to benefit the air cargo segment, which has provided logistical flexibility during uncertain times.

Revival seen in surface players due to re-opening of economy

Post the exceptional E-Way bill volume growth seen in March (~75% YoY) compared to pre-Covid 5.5 crore levels, April saw the momentum slowing (7% growth) till it reached a nadir of 27% de-growth in May and then reviving to 96% of normalised levels in June. However, green shoots continue to be seen on the e-commerce front, which typically requires higher warehousing component (higher value added services) compared to retail trade via shops and is beneficial for 3PL companies, as existing companies re-organise their supply chains to align them to the evolved buying behaviour.

Rail, ports see weak performance in Q1

Overall container volumes in APSEZ, JNPT saw a QoQ dip in performance in Q1 (9%, 6% at 2.1 million TeUs, ~1.4 mil TeUs, respectively). Also, the greater trans-shipment volumes at Indian ports, may impact the container product mix for ports (due to congestion at major transhipment ports like Colombo and Singapore port). Rail CTOs are also expected to see 7-9% QoQ de-growth in Exim and domestic trade (based on two months data). On a positive note, higher crude oil prices typically help CTOs gain market share over road players (preference over longer distances). CFS, on the other hand, could see higher utilisation due to extended waiting period for exporters.

Financial performance expected to remain mixed

In our logistics coverage universe, we expect a QoQ dip in performance, mainly due to weak capacity utilisation in April and May. However, on the operational front, Concor is expected to report strong numbers (mainly due to higher employee and LLF provisioning in Q4FY21), leading to a favourable EBITDA growth for overall coverage. On a YoY basis, the entire logistics pack is expected to report a strong performance (mainly due to weak base and a partial lockdown in the current quarter). Higher crude oil prices are expected to be a drag on topline performance (volume hit due to passing of hikes to customers). However, warehousing is expected to continue its strong run due to higher underlying demand.

To Read Complete Report & Disclaimer Click Here

https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

Above views are of the author and not of the website kindly read disclaimer