Despite slower activity and the global slowdown dragging export and import volumes, Jefferies maintains a "buy" rating on most of the Indian transport and logistics companies.
That is because the sector should benefit from the base effect in the first quarter of fiscal 2024, Jefferies said in a Feb. 27 investor note. "We believe 2023 should see some follow-ups to the National Logistics Policy, continuing GST-driven organised players' share gain, and rising dedicated freight corridor traffic," the brokerage said.
Adding to this, Jefferies expects the global GDP growth to rebound to more than 2.5% in 2024, after falling to 1.8-2% in 2023, with volumes possibly bottoming out in the coming quarters.
Jefferies Top Picks
Jefferies prefers Container Corporation of India Ltd., Delhivery Ltd., and TCI Express Ltd. among the other logistics service providers in the sector.
The brokerage expects a 20% CAGR in volume and a 25% CAGR in profit for Concor through fiscal 2022–2025, thanks to the dedicated freight corridor, which should drive growth. Meanwhile, the "near-term trigger of divestment is on the back burner and any progress here will be a complete positive surprise," Jefferies said.
It keeps a 'buy' call with a price target of Rs 900 per piece.
Trucking fleet relationships, customer relationships, and "historical" land banks for setting up sorting centres are the drivers of TCI Express' high returns on equity and margin management even in an inflationary environment, according to Jefferies.
"We believe a 26% earnings-per-share CAGR in FY22E-25 and more than 25% returns on equity in an industry set for high growth for organised players could see the stock re-rate further as the company consistently delivers," it said.
Jefferies has kept a 'buy' call on the stock with a price target of Rs 2,370 apiece.
For Delhivery, the brokerage sees the current price levels as factoring in single-digit B2C growth and also a higher risk perception. "We believe delivery on the toned-down expectations will be enough for the stock to move materially higher in 2023," it said.
Jefferies maintains a 'buy' rating with a price target of Rs 570 per share.
Double Digit Volume Growth For Concor, Gateway
Meanwhile, Jefferies highlighted the dedicated freight corridor that will link Gujarat ports to the hinterland and be completed by the second quarter of fiscal 2024.
The export-import cargo shift to rail is dependent on this because it will mean end-to-end rail connectivity for cargo, as opposed to rail and then road for end connectivity that is not just last mile in nature, the brokerage said.
"This should drive double-digit volume growth in FY24E for both Concor and Gateway," it said.
Jefferies maintains 'buy' on Gateway Distriparks Ltd. with a price target of Rs 90.
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