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Goldman Sachs cuts 2016-18 earnings sector outlook for Indian port & logistics by 8%.

Date: 08-01-2016
Subject: Goldman Sachs cuts 2016-18 earnings sector outlook for Indian port & logistics by 8%
CHENNAI: The Indian ports and logistics sector is likely to see pressure from flat traffic and volume growth, says Goldman Sachs, which cuts its earnings outlook for 2016-18 by 8% for Adani Ports Ltd, Gujarat Pipavav Port Ltd and Container Corporation of India Ltd.

Goldman also cut its price target on the three port majors by 8%.

Worldwide idle capacity and declining box freight rates have been a feature of the containership sector since the 2006 crisis. At the domestic level, the Jawaharlal Nehru Port Trust (JNPT) reported December 2015 container volume growth of 1% year over year.

"We expect near-term pressure on port volumes to continue,'' the brokerage said in a note on Wednesday.

Goldman lowered its volume growth estimates for full year 2016-18 for Adani Ports and cut its price target to Rs 338 from Rs 366 earlier.

The brokerage was positive on Adani Ports' activity at Mudra and maintained its buy rating on the stock. Goldman said the $9.4 billion conglomerate will continue to gain market share despite slowing volumes as it has better infrastructure and a multiple port network. Adani Ports and Special Economic Zone Ltd (APSEZ) is part of Adani Group that represents a large network of ports with India's largest Special Economic Zone (SEZ) at Mundra, Gujarat.

Gujarat Pipavav, which has seen declines in both consolidates and container cargo, will continue to see lower volume growth. The solitary port continues to lose market share, said the brokerage which rated its stock neutral and cut its target to Rs 169 from Rs 185.

Container Corporation is also set to see lower export-import volumes, said the brokerage, which cut its price to Rs 1,472 from Rs 1,579 earlier. But the company has strong long-term growth potential once the Western Dedicated Freight Corridor (DFC) commissions and goods and services tax (GST) is implemented, Goldman said, reiterating its neutral stance.

The passage of the landmark GST bill and the construction of Western DFC by the Indian Railways, connecting Delhi and Mumbai will prove a boon to freight companies.

Source : timesofindia.indiatimes.com

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