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Cheer for B2C, but B2B in slow lane

Q3 performance is expected to be a mixed bag for the Logistics space, with B2C volumes picking up led by e-commerce volumes in the festival season. However, B2B volumes are expected to be muted led by a slowdown in the MSME sector, deceleration in consumption across-the-board and lower number of working days. At ports, a decline in coal imports and iron ore exports may result in slower growth. We prefer Delhivery, VRL Logistics, Adani Ports and JSW Infra in the Logistics space.

B2C to pick up; B2B to slow down: e-way bill generation rose 17% YoY in October-November, post touching the highest-ever generation in October on account of healthy demand in the festival season, indicating a rising shift from unorganized to organized. Expect B2C players such as Delhivery to report a revenue growth of 9%, aided by steady B2C growth of 7% and B2B growth of 19% led by market share gains. Expect margin to recover 50bps YoY led by better utilization of line haul and vehicle capacity, however,, higher fixed costs led by opening up of new hubs could hit profitability in the interim.

B2B Express companies such as Blue Dart Express (BDE IN) and Allcargo GATI (ACLGATI IN) may witness subdued revenue growth of 6% and 3%, respectively, led by overall slowdown in consumption and MSME sectors. Margins may be stable in Q3E, with some recovery for BDE to 8.8% from 8.3% in H1, led by lower ATF prices (down 8% YoY) and cost optimization for ACLGATI expecting  margins to improve to 4.8% versus 1.6% YoY.  Margins may further improve from Q4, after gross price hikes in the range of 9-12% are effected by both the companies from 1 January 2025. VRL Logistics (VRLL IN) is the only surface logistics company expected to report double-digit revenue growth of 13% in Q3E, led by improvement in realization post a successful price hike of 8%. Margins may also be maintained at 15.8%, led by better absorption of cost and stable diesel prices.

In the 3PL space, expect Mahindra Logistics’ (MAHLOG IN) revenue to grow 10% YoY, aided by 3PL – expected growth of 7% led by contribution from Engineering, Automobile and Last-Mile Delivery (on Wizzard consolidation). Consolidated EBITDA margin is likely to increase by 80bps to 4.5%, led by cost optimization and expected drop in losses from the B2B express business. Expect MAHLOG to report a net loss of INR 13mn (may continue to be in the red for the eighth consecutive quarter).

Decline in coal imports and iron ore exports may lead to a slowdown in port volumes: Volumes for major ports in October and November declined 4%, led by a drop in coal imports (rise in domestic production, dip in power demand) and iron ore exports (low demand from China, slump in global prices). This is likely to slow down volume handled by Adani Ports & SEZ (ADSEZ IN; reported at 3.6% YoY versus 8.5% in H1) and JSW Infrastructure (JSWINFRA IN; expected at 6% YoY versus 14% in H1). In Q3, revenue contribution from Gopalpur Ports and Astro Offshore business (for ADSEZ) and from Navkar Corporation (for JSWINFRA) may commence. On consolidated basis, expect ADSEZ’s revenue to grow 4% YoY (in-line with volume growth), with EBITDA margin at 61.5% and PAT at INR 23bn, post likely forex loss of INR 2.5bn given adverse forex movement. JSWINFRA’s revenue may grow 23%, with EBITDA margin at 48.5% (lower due to consolidation of Navkar Corp).

Hopes for growth in EXIM volumes given higher container volumes at ports: Overall freight volume for the Indian Railways for YTDFY25 and in Q3 (up to November) was up 2% YoY each to 1,037mn and 261mn tonnes, respectively. For Container Corporation of India (CCRI IN), expect blended originating volume to grow 11% YoY, with EXIM volumes likely to recover given higher container volumes at all major ports (up 6%). Domestic volume may continue to grow. Consolidated revenue may grow 9% in Q3E, with EBITDA margin at 23.6%. We expect Adani Logistics’ revenue to grow 15%, led by continued growth in rail volumes and stable EBITDA margin at 26%.

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