Shares of major logistics stocks rallied in Monday's trade after the Indian government launched the National Logistics Policy. The first leg of the rally in major logistics stocks began at the end of July after they reported a 2 to 3-fold increase in net profits and strong volume growth in Q1. Despite the steep rise in fuel prices, companies have managed to post a robust performance in the June-ending quarter.
Logistics stocks are up 15-50% in last three months ; Here are the top reasons
On September 17, Prime Minister Narendra Modi unveiled a much-awaited national logistics policy. The main objective of this policy is to bring down the logistics costs for businesses. Logistics costs in India are as high as 14-15% of the GDP compared to developed nations such as Singapore and the US, which have managed to cap this cost at 7-8% of the GDP. Through the National Logistics Policy, India aims to bring down the cost to 8% of the GDP by 2030.
To bring logistics costs in line with the developed economies, the government has undertaken several initiatives in NLP, including the Unified Logistics Interface Platform (ULIP), Ease of Logistics Services (E-Logs), and SIG — System Improvement Group.
The government said that the Unified Logistics Interface Platform will bring all the digital services related to the transportation sector into a single portal, freeing exporters from a host of very long and cumbersome processes.
Further, With the implementation of e-logs, industry associations will be able to directly address any issues causing problems in their operations and performance with government agencies, ET reported.
Meanwhile, the introduction of the PLI scheme and the announcement of setting up Multi-Modal Logistics Parks (MMLP) across the nation, and the Gati Shakti initiative, faceless assessment in customs and e-sanchit online platform that enables paperless export-import trade processes, have augured well for the Indian logistic industry.
Furthermore, the introduction of the e-way bill was a welcome move as it did away with many of the tedious verification mechanisms that hindered inter-state movements. With this introduction, the Indian logistics industry is expected to grow rapidly as it helps transporters save money and time.
The implementation of GST has already improved the logistics industry's efficiency by shortening transportation cycle times and improving supply chain and turnaround times.
According to Statista, the size of the Indian logistics market was around 250 billion U.S. dollars in the financial year 2021. This market is expected to grow to 380 billion dollars by 2025, at a compound annual growth rate of 10 to 12 percent.
Blue Dart Express delivered a robust performance over the last several quarters, despite a steep rise in fuel prices. Blue Dart Express grew its EBIT margin by 124% and net profit margin by 275.41% over the last 12 months. Furthermore, it reported a record EBITDA margin of 25.03% in the March quarter.
In Q1 FY23, Blue Dart Express reported an increase of 279 percent in its consolidated net profit at ₹118.8 crore as against a net profit of ₹31.3 crore in the April-June quarter a year ago. The revenue from operations rose 48.94 percent to ₹1,300 crore as against ₹812.8 crore in the corresponding quarter of the preceding fiscal.
VRL Logistics posted a consolidated net profit of ₹49.4 crore as against a net loss of ₹6 crore in the corresponding quarter of the preceding fiscal. It reported revenue of ₹417.3 crore for the quarter ending in June 2021, and revenue of ₹7201.1 for the same period ending in June 2022, marking the company's highest quarterly turnover.
The operating profit in the June quarter was ₹114.4 crore, up 216.89% from ₹36.1 crore in the previous quarter of the same fiscal.
On the other hand, Allcargo logistics posted a two-fold jump in its net profit to ₹280 crore as against a net profit of ₹106 crore in the same quarter of the previous year. Total revenue in the first quarter of FY23 increased by 65% to ₹5,675 crore, up from ₹3,449 crore in Q1 FY22.
TCI Express reported a standalone net profit of ₹31 Cr for the quarter ended June, up 30.25 percent year on year (YoY) from ₹23.8 crore in the previous year's corresponding quarter. The revenue from operations for the first quarter of FY2023 was ₹292.4 crore versus ₹224.6 crore, an increase of nearly 30.18 percent year on year.
Delivered 15-50% returns in last three months
Allcargo logistics stood as the top performer among all logistic stocks in the last three months. During this period, the stock has climbed from ₹255.30 to ₹400.50, generating a return of over 56.87%. From March 2020 to December 2021, the stock has given has an astounding return of 572 percent moving from ₹58 to ₹390. After delivering 5x returns, the stock has seen some corrections and fell to ₹262.95 in June. However, it quickly bounced back and rallied to Rs. 400 to date.
Shares of Blue Dart Express hit a 10-year high of ₹9,280 on September 07. The stock has picked up steam since June, rising nearly 33% to date. In the last year, the stock returned 36.4 percent, which is 34% higher than the Nifty which returned 2.4 percent. In the last three months stock delivered 32.65% returns.
Mahindra Logistics rallied 22.35 percent from ₹418.20 to ₹511.70 since June. The stock began on a negative note at the start of the year. The stock fell 14 percent in January and 30 percent in February, but it recovered in March, began slowly rising, and has risen nearly 28 percent since then.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.