Strong container volume boost for Concor, Gateway
Analysts expect volume trend to sustain
After a muted performance in the first eight months of the current financial year, container volume growth came in at 14 per cent year-on-year (y-o-y) in December. This is the highest y-o-y growth recorded in this fiscal year and is partly a function of higher demand as well as low base, says an analyst at a foreign brokerage.
Barring April, when there was a 9.8 per cent improvement, growth in most months in the current fiscal year has been around the six-per cent mark.
Brokerages expect the trend of double-digit growth to sustain over the next couple of months. Given the year-to-date volume growth of 7.1 per cent, double-digit growth in the March quarter could help overall container volumes finish FY18 with a strong nine per cent growth compared to the three per cent uptick registered in FY17.
The immediate impact would be reflected in the performance of container cargo companies such as Container Corporation of India (Concor) and Gateway Distriparks in the December quarter. Analysts expect Concor to benefit the most, given that Jawaharlal Nehru Port (JNPT), which accounts for half its volumes, recorded a growth of over 10 per cent in December. This was aided by the start of the fourth terminal and decongestion that led to improving operating efficiency, faster turnaround time for ships and lower dwell time. Volume growth for Concor in the December quarter is pegged at 11.5 per cent.
While the overall container volume growth (includes container transport by road) was strong, railway container volumes grew a robust 13 per cent in the month. Analysts at JM Financial said the fifth consecutive month of high double-digit growth strengthened the volume recovery trend for container rail operators such as Concor and Gateway Distriparks.
A key negative for container freight station (CFS) operators is the trend of direct port delivery, which has increased to 36 per cent at JNPT. Analysts, however, say that port infrastructure limitations have softened the impact. In fact, volumes for CFS operators have increased to 61 per cent of direct port deliveries in December 2017 compared to 15 per cent in February 2017. This has resulted in higher volumes for JNPT CFS operators such as Allcargo Logistics, Gateway Distriparks and Navkar Corporation. Given CFS is a significant part of revenue, it should have a positive impact on the financials in the December quarter.
Among the larger listed entities, most analysts have a ‘buy’ on Gateway Distriparks, with the stock trading at about 30 times one year forward priceto-earnings (P/E) estimates. After a 47 per cent increase in its prices over the last year, Concor is trading at upwards of 36 times one year forward P/E estimates.