INDIA LOGISTICSLOGISTICS Getting Ready for the Long Haul
INDIAINDIA LOGISTICSLOGISTICS Getting ready for the long haul GST | DFCC | DMICDC | E-COMMERCE COASTAL SHIPPING | 101 WATERWAYS INSTITUTIONAL EQUITY RESEARCH India Logistics Getting ready for the long haul INDIA | LOGISTICS| Sector Update 9 August 2016 Why read this report? Companies • India’s logistics network is insufficient to support its expected GDP growth of +8% and would require overhauling rather than incremental change. Navkar Corporation • Road and rail transport is under severe pressure while water transport is not developed. Reco BUY Logistics is the backbone of economic growth and investments in road, rail, and CMP, Rs 205 waterways are critical to maintain smooth and efficient movement of goods. Target Price, Rs 288 • With policy support, the significant reorientation of cargo towards rail and coastal Gateway Distriparks shipping, which are more economical than road. Reco BUY • Logistics stocks have already outperformed with significant rerating in earnings CMP, Rs 272 multiples. However, we believe the sector still offers great investment opportunities Target Price, Rs 363 over the long term. Along with higher growth, logistics players will also see improvement in return ratios because of capital efficiency. Container Corporation of India Reco Neutral • We maintain BUY on Allcargo while initiating coverage on Navkar and Gateway CMP, Rs 1435 Distriparks with a BUY recommendation. Target Price, Rs 1530 GST implementation to rationalise tax structure Allcargo Logistics As a result of the new GST tax model, individual state administrative borders are likely to Reco BUY CMP, Rs 186 become irrelevant for most industries, driving rationalization of logistics operations and Target Price, Rs 200 infrastructure. Major changes after GST: (1) consolidation of warehouses, (2) improved efficiencies due to reduction of trade barriers, (3) revaluation of sourcing and manufacturing VRL Logistics decisions, and (4) growth in free‐trade warehousing (FTWZ) and multimodal logistics parks Reco SELL (MMLP).
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