Logistics sector poised for growth, but buy stocks selectively: Analysts

 Analysts see the logistics sector as a big beneficiary of the 're-opening of the economy' theme, with pent-up demand expected to drive growth

Even after a stupendous rally in the shares of logistics companies in the past year that saw stock prices of frontline players jump as much as 270 percent, analysts have toned down their return expectations. While they remain bullish on the sector as they see it as a big beneficiary of the 're-opening of the economy' theme, with pent-up demand expected to drive growth, they suggest investors be choosy and buy stocks of companies that have revenue visibility and balance-sheet strength.

Besides traditional avenues for growth, cold chain supply solutions for the pharma and fast-moving consumer goods (FMCG) sector can result in big opportunities for space, they said.

"Vaccine partnerships will be a near-term booster for the sector and are sentimentally positive, but the real kicker is the sharp uptick in the economic activity, which will structurally drive the logistics sector," said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.

The second wave of the pandemic is largely behind India with daily cases at a two-month low. Given this, some of the states have started to unlock and the focus has now shifted to vaccinating citizens at an aggressive pace. As the economy opens, analysts believe pent-up demand for goods and services will play out.

"Whenever one talks about the boom in the logistic sector, it directly indicates an upshift in business growth and ultimately expectations of higher GDP. The pent-up demand in many sectors, especially manufacturing, Agri, pharmaceuticals, chemicals and metals will require higher transportation of raw material, semi-finished and finished goods. This will become a major driving force for the sector," said Vishal Wagh, research head at Bonanza Portfolio.