Increasing urbanization along with the rapid growth of e-commerce pushed the Indian logistics industry on the fast lane. The covid-19 pandemic aggravated the need for cold storage, which accelerated the pace of logistics in the country. The size of the Indian logistics industry is pegged at $215 billion, dominated mainly by unorganized participants. Only 10%-15% of this market is captured by the organized players. The Indian logistic market is expected to grow at a CAGR of ~11% over the next four years. The cost of a product is directly proportionate to the logistics cost associated with it. In India, the logistic cost is around 13%-14% of the Gross Domestic Product, way higher than many developed countries. Nationwide improvement in infrastructure, digitization, and quicker adoption of modern technologies, consumers' leaning towards shortened delivery time, process improvement through innovative techniques for faster deliveries should drive the Indian logistics industry's growth ahead. We have shortlisted three players in the Indian logistics industry with a potential for long-term investment.
Mahindra Logistics Ltd (NS:MALO)
A group company of Mahindra & Mahindra (NS:MAHM), this logistics company provides logistic solutions, warehousing services, and supply chain services. It has a presence in over 100 countries and emerged as India's leading third-party logistics services provider. Mahindra Logistics has launched an electrical vehicle delivery service called "Edel," which generates a good response from the market. Notably, e-commerce giant Flipkart has partnered with Mahindra Logistic for the former's delivery solutions. They intend to deploy 1,000 vehicles for last-mile delivery over the next six months and expect this vertical to deliver good margins. They have recently won a Rs 1,000 crore contract from Bajaj Electricals (NS:BJEL) to transform the latter's logistic services.
Mahindra Logistics has reported a good set of numbers for Q4FY2021. Its net sales of Rs 974 crore were up 19.9% year-on-year from Rs 811.76 crore. The company's quarterly net profit jumped 30.63% year-on-year during the same period. Last year, the stock delivered ~78% return and trading at a 7.6% discount to its 52-week high of Rs 615.
Gateway Distriparks Ltd (NS:GATE)
Gateway Distripark is an integrated logistics company. The company operates in three verticals: Container Freight Station, Inland Container Depot with rail movement, and Cold Chain Storage & Logistics. The company's focus is on the rail vertical. They are expected to benefit from the commissioning of a dedicated freight corridor project of Indian railways. It should help them lower transit time, increase double stacking, and improve connectivity to their ICDs. It, in turn, should help the company's cold storage business which may prove a catalyst for their top-line growth going forward.
Gateway reported a mind-blowing four-fold jump in consolidated net profit in the fourth quarter of fiscal 2021. Its net profit was Rs 46.6 crore in Q4FY2021 compared to Rs 11.69 crore in the same quarter in its previous fiscal. Total income grew 16.1% year-on-year to Rs 353 crore in Q4FY2021 from Rs 304 crore in the fourth quarter of FY2020. The shares are presently trading at Rs 277, a 14.8% discount to its 52-week high of Rs 325.
Aegis Logistics Ltd (NS:AEGS)
Aegis Logistics operates in two divisions, namely—Gas and Liquid. The Gas division is their primary growth driver, whereas the Liquid division enables regular and steady cash flows. The company has entered into a joint agreement with the world's leading independent tank storage company Royal Vopak of Netherland. The government of India's focus on LPG distribution should help Aegis to expand its LPG division. It should accelerate growth in terminal business and diversify into new gas storage areas and other energy projects, including renewable.
The company's net sales stood at Rs 242.73 crore in Q4FY2021, up 3.12% from Rs 235.38 crore in the corresponding quarter of FY2020. Its quarterly net profit skyrocketed 173% to Rs 94 crore from Rs 34.35 crore during the same period. The stock is trading at a 17.5% discount to its 52-week high and delivered 63.3% returns in a year. India's logistics sector is witnessing a massive transformation from a supporting industry to an essential & mainline sector over the last two years. Well-organized and technology-driven logistics companies are poised to do better going forward. It is likely to reflect in their stock price.