JPMorgan has initiated coverage on India's logistics space, picking Delhivery Ltd., Aegis Logistics Ltd. as top buys while taking a more cautious stance on other players in the sector.
In a latest note, the brokerage highlighted India's growing e-commerce logistics market, which is projected to grow at a 16% CAGR through FY30.
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This is driven by an increase in customer penetration in Tier II and Tier III cities as well as technology-led efficiencies. Meanwhile, labour shortage is prompting automation and infrastructure investments, thus boosting competitiveness across sectors.
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JPMorgan's Top Picks In Logistics
As mentioned earlier, Delhivery and Aegis Logistics are two of JPMorgan's top picks in the logistics space.
The brokerage has initiated coverage on Delhivery with an 'overweight' rating and a price target of Rs 575. It has also initiated an 'overweight' rating on Aegis Logistics, with a price target of Rs 895.
JPMorgan believes Delhivery has a strong Ebitda growth potential and expects the company's earnings to accelerate with an FY25-28 Ebitda CAGR of 58%.
This will come on the back of economies of scale kicking in and headwinds easing. Further supporting factors include GST-led tailwinds and greater cost optimisation.
As for Aegis Logistics, JPMorgan believes the company's oil and gas logistics story is under-appreciated, which suggests LPG import expansion.
Key growth drivers for Aegis Logistics include marquee customer tie-ups, strong return on capital employed and high entry barriers.
Price Target For TCI Express, Container Corp
It has initiated coverage on two more logistics companies in TCI Express and Container Corp.
TCI Express has been rated 'neutral' with a price target of Rs 750. The same goes for Container Corp, which has a price target of Rs 580.
JPMorgan noted that TCI Express could face the heat from the structural shift created by new players such as Delhivery.
The brokerage also flagged concerns over Container Corp's earnings misses and market share losses.
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