Logistics stocks rally up to 5% as GST hope revives

NEW DELHI: Shares of logistics firms surged up to 5 per cent in Thursday’s trade amid hopes that the GST bill will finally get passed in Parliament after the government dropped the much-opposed 1 per cent manufacturing tax and gave a guarantee to compensate the states for any revenue loss in the first five years of its rollout.

Analysts believe road transport operators are likely to see the highest positive impact from GST implementation. The impact may range from improved efficiency, a shift in freight traffic from unorganised to organised sector to outsourcing of in-house logistics.

At 9.35 am, shares Allcargo Logistics were trading 4.56 per cent higher at Rs 199.30. Snowman Logistics soared 4.43 per cent to Rs 88.35. Gati and Arshiya rose 3.80 per cent and 3.16 per cent, respectively.

Sical, VRL Logistics and Blue Dart gained up to 3 per cent. TCI rose 3.56 per cent to Rs 361.80.

“With hopes of the GST reviving and anticipated recovery in the domestic economy in FY17, the logistics sector (comprising VRL, TCI and GATI) is anticipated to witness volume recovery. Segment EBIT margins remain well below prior cyclical peaks. Current sector valuations ( at 19 times FY17E PE) are in line with historical through-cycle averages for the road freight sector. We prefer VRL Logistics, which has the highest RoCE, a strong balance sheet and consistent FCF generation track record among the road freight plays," ICICI Securities said in a July note.