LOGISTICS SECTOR
Sector of the Future
Logistics has been a traditionally dull business in India, at least as far as the capital Market is concerned. The market has not taken up in a big way to any logistic company in the past, except perhaps Blue Dart and a few courier companies in the past. For a brief while.
The Logistics business has undergone a major transformation in the last one decade, and today in our view it is the business of the future. There are many players in this segment and new avenues of doing this business have opened up. There could be even more changes in the offing, and in our view this sector needs close watching. There is scope for large players emerging in this segment, and catching the possible candidates early may yield huge returns over the long term.
In this Report we have tried to identify such potential leaders. The companies included in this Report have the potential, but have not yet grown to their full potential . Will they grow as per expectation? We think so, but only time will tell.
SERVICES OFFERED
PEER COMPARISON
Logistics Companies
Segment Mix
It is very important to have good segment mix for any logistics company. We have selected three companies out of the logistics universe. These three companies have fully integrated businesses across all segments. All the three companies are leaders in particular segments.
· Allcargo is the leader for Multimodal Transport Operations. Allcargo is also focusing on expanding its network across the world and it is adding more and more ECU line franchises.
· Arshia Int. has setup a rail network across the nation which helps it for inland transport movement. Further the company is focusing more on its FTWZs operation. Currently it possess only 16% business share which is likely to increase sharply over the years.
· GDL is operating through its two subsidiaries named GDL Rail and Snowman. While very different from the other two companies, GDL has 50-50 business mix from transport operation and CFS operations. Further the company is expanding more on the front of Cold Chain and Distripark business.
SEGMENT WISE PBT MARGINS
Traditionally Logistics Companies were running with very low profit margins, because of asset heavy and labor intensive business model. But now a days the scenario is changing since couple of years, because of operation optimization and implementation of efficient machinery. Among these three companies also there are big gaps in profit margins. Arshiya Int. has highest margins in all the three segments that are because of its business mix. Its FTWZ/CFS segment offers many unique benefits and value added services for exporters and to re-exporters. Further lower business share from this segment prevented a major impact on bottom-line. Because of that Arshiya is going to expand its FTWZ/CFS segment. Gateway Distripark has very thin margin for its transport segment. But the company has good margins in its cold chain operations. Though Allcargo is the leader in MTO, this segment has very low margins. Overall, all the three companies manage profit margins by managing business mix.
For investment purpose one can have exposure to all the three companies as each of them is leader in its particular segment. Allcargo will be benefited by its logistics network through its direct office as well as through its franchisees. Arshiya International has introduced new concept of FTWZ in Indian Logistics sector which will gain the biggest benefit of growing exports and imports. GDL is the only company which has organized pan India cold chain transportation network. Keep reading my blog to have company specific update for these three and many more companies.
Happy Investing !!
