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Momentum continues to build up

For Q3FY22, we highlight: i) road tonnage sustaining positive momentum, reflected in a 4% QoQ jump in E-Way Bill registrations; ii) Concor’s 7% YoY growth in volumes, and thus it should post strong growth on the back of much stronger margins; and iii) momentum in Blue Dart (BDE) should continue and reflect in robust earnings growth.

In Q3FY22E, we expect Concor, BDE and – to a lesser extent – MLL to post standout results. Our top sector pick is BDE due to the pandemicinduced boom in e-commerce coupled with its now leaner cost structure. We are also bullish on Concor since it is entering a phase when DFC volumes should begin to show up. We expect earnings upgrades on Street for Concor and BDE post-results.

Demand remains on positive trajectory

The overall demand scenario improved in Q3FY22 as reflected in better freight rates QoQ. The Omicron-led hiccup can be potentially a slight dampener for Q4, but Q3 seems to be largely unaffected. During Q3FY22, intra-state E-Way registrations grew 4% QoQ, whereas inter-state registrations posted 4.4% growth. Our channel checks indicate positive momentum in core trucking rentals as well. Express businesses might see cool off slightly vis-à-vis the festive season-led Q2FY22.

Container rail volumes: Strong build-up towards DFC underway

Extrapolating the December numbers, we expect overall container volumes to be broadly flat. However, the mix should tilt towards the domestic segment, which is expected to post 12% QoQ growth. Exim, on the other side, is expected to decline 4% QoQ. However, Concor has reported its Q3FY22 volumes and these look very strong. It posted a 7% YoY uptick in overall volumes, and this should lead to sales/PAT growth of 10%/25% YoY as per our estimates.

Concor has provisioned INR2.25bn of LLF fees for H1FY22; hence we expect another INR2.25bn to be provisioned in H2, which will add up to the total arrangement of INR4.5bn with the Indian Railways.

Potentially standout results in the offing

Blue Dart Express: We expect BDE to sustain its strong momentum, albeit marginally lower than Q2's high festive base. We build in a 6% QoQ fall in top line with a margin of 16.2%, but expect 10% earnings growth YoY. We believe BDE will be one of the few stocks in Q3FY22, which should see significant earnings upgrade to consensus FY23 forecast after the result.

Concor: Concor has reported its Q3FY22 volumes and these look very strong. Concor’s overall volumes are up 7% YoY, and this should lead to 10%/25% sales/PAT growth YoY as per our estimates.

Mahindra Logistics: For MLL, we expect Q3 to resonate Q2 figures, albeit marginally on the higher side, as the warehousing segment ramps up further. Overall, we forecast top line would increase 4.6% QoQ with a 10.6% QoQ jump in EBITDA

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