APM Terminals’ prospects are promising

Stock markets have been doing well in 2021, and the logistic sector looks quite promising in the future and hence our topic for this week is APM Terminals Pipavav also formerly called Gujarat Pipavav Ports Ltd. The port is located in Gujarat having access to main shipping lines and access to key markets of northwest India. The company can handle up to 1.35 million TEUs of containers, 5 million tonnes of dry bulk cargo, 2 million tonnes of liquid cargo, and about 250,000 cars per annum. APM Terminals Pipavav is a gateway port for containers, bulk, breakbulk and liquid cargo with a dedicated container stackyard and warehousing infrastructure providing ample storage for all types of cargo. Strategic tie-ups with major companies enable it to handle the import and export of liquid commodities including petroleum products, chemicals, edible oil, bitumen, and LPG cargo. Port Pipavav is a successful public-private partnership managed and operated by APM Terminals which is also the largest shareholder ( 43.01% ) in Port Pipavav.
The company has a total land area of 631 hectares, hence there is plenty of land available for expansion and leasing for port-related businesses. The logistics industry in the country has seen volatile times in the last few years on the back of supply chain disruptions due to the pandemic, but the sector is set to undergo a transformative shift as it gears up to the operationalisation of dedicated freight corridors across western and eastern India. These Dedicated Freight Corridors would provide immense cost advantage and efficiency to the logistics industry. The western dedicated freight corridor is currently only partly operational with APM Terminals Pipavav being the first port connected to it while the remaining part of the corridor is expected to be operational by the end of the calendar year 2022. The modal shift to rail transportation is also going to offer higher speed, higher volume, cost advantage and long haul freight transportation in lower time.
Infrastructure development and better connectivity to ports is the key to boosting the freight movement in the country. While the government is implementing the National Infrastructure Pipeline to strengthen the country’s infrastructure, both dedicated freight corridors and better road infrastructure are likely to reduce the overall logistics cost substantially. The government has also proposed the Draft Indian Ports Bill 2021 and The Major Port Authorities Bill 2021 that seeks to transform the overall management of the ports in the country. This will offer autonomy to the ports to manage it independently along with fixing tariffs without the intervention of the state government and pave the way for private investment plus scale up coastal infrastructure that would support the Atmanirbhar initiative of the government. Various initiatives of the government like the National Logistics Policy and National Infrastructure Pipeline along with private investment in the development of multi-modal logistics parks and SEZs will strengthen the country’s supply chain mechanism.
Apart from the infrastructure development, another factor that would bring about transformative change in the logistics industry is digitisation through the adoption of technology as this will improve productivity and efficiency of the sector. The implementation of digitisation and infrastructure development needs to be implemented at a faster pace to ensure sustainable growth as the country aspires to become the third-largest economy in the world by 2030. Analysts and large brokerage firms like Nomura are very bullish on the Indian logistic industry and expect stocks like APM Terminal Pipavav and Adani Ports to do very well in 2022-23. Fund managers and logistic sector tracking analysts expect the APM Terminal Pipavav stock currently quoting at Rs 100 to deliver a 40% price appreciation in the next 12-18-months time frame.