Freight Forward

May 20, 2016

Sector
Shipping - Neutral

Shipping & Logistics Monthly Report: May 2016

Logistics - Overweight

Freight rates/Indices & container volumes - Apr 2016

VLCC

Suezmax

Aframax

Capesize

Panamax

Supramax

Handysize

Container Volume (YoY)

Railway Earnings (YoY)

Research Analyst
Bharat Chhoda
bharat.chhoda@icicisecurities.com
Ankit Panchmatia
ankit.panchmatia@icicisecurities.com

ICICI Securities Ltd | Retail Equity Research

The Baltic Dry Index for April remained volatile starting the month at
430 levels and reaching a high of 750 levels. Indices for dry bulk
continue to improve, at an average of 621 during April. Chinese
seaborne imports increased 6% YoY in Q1FY16 leading to this
improvement. China witnessed restocking of iron ore inventories, on
the back of higher steel demand and improved prices in recent
months. FY15 being a distressed year, marginal improvement in FY16
results in a sharp recovery in indices
Baltic Dirty Tanker (BDTI) corrected 4% MoM to 774 compared to
earlier 800 levels. Correspondingly, the YTD average (January-April)
for BDTI remained down 3% YoY to an average of 820. Baltic Clean
Tanker Index (BCTI) grew 4% MoM to 525 levels. Conversely, the YTD
average for BCTI was down 16% YoY to 570 levels

For April, total tonnage carried by major ports grew 4% YoY to 52.4
MT vs. 47.8 MT in April 2015. Petroleum, oil and LNG (POL) continues
to remain major commodity with 31% of total volume. Growth in this
was offset by de-growth in coal & fertiliser volumes. Container
volumes for April at major ports grew 4% YoY to 686000 TEUs.
Growth was mainly contributed by smaller ports like Kolkata (up 36%
YoY), Tuticorin (up 8% YoY) and Kochi (up 32%). However, volumes
at JNPT (largest port) continue to stay flat while Chennai de-grew 10%
Outlook
Yearning uptrend in dry bulk; tanker remains eminent
During January 2016, vessel deliveries were at 7.2 million dwt, double the
average monthly deliveries in 2015. This impact was neutralised by YTD
scrapping of 17 million DWT. Higher scrapping was on the back of
improved scrap metal prices. Clarksons Research denotes the average
scrapping age for bulk carriers dropped from 33 years in 2007 to 24 years.
However, due to current market conditions, vessels built in the 2000s are
now candidates for recycling. Tanker rates continue to taper throughout
2016, leading to a correction of 3% and 16% in BDTI and BCTI indices,
respectively. Given the recent rise in crude prices coupled with concerns
on unwinding of high product inventories led to a flattish/decline in tanker
rates. Reversal of bunker costs could impact profitability of I-direct
shipping universe. Post phenomenal FY16, we expect SCI and Great
Eastern Shipping (Gesco) to witness margin tapering in FY17.
Sustainable growth in volumes required, to call it a recovery
Port volumes for April grew 4% YoY to 52.4 MT. Majority of the growth
was driven by lifting of mining ban in Goa, which led iron ore volumes to
be ~7% of total volumes vis--vis 1% in the earlier year. Container
volumes at major ports grew for the fourth consecutive month by 4%
YoY. However, rail volumes for April de-grew 4% YoY to 86.5 MT.
Though on a slight upward trend, the continuity in trade volumes remains
key for inland container depots (ICDs) & container train operators (CTOs)
to a exhibit a revival in earnings. Companies like Concor and Gujarat
Pipavav continue to be in a sweet spot in this trade uptick.
Express players continue to lead short haul distance; pan-India reach key
Indian Railways has realised the fact that they are losing share to road due
to elevated freight rates. Subsequently, with withdrawal of port
congestion charge & busy season charge railways is competing heads on
with roadways. With this rationalisation, though rail would be cheaper for
long haul routes, pan-India road players would continue to co-exist for
short haul and hinterland connectivity. We remain positive on key players
like TCI, Gati and BlueDart.

Exhibit 1: Spot Freight rates (US$ per day)

Post high growth in December VLCC rates for April
improved 2% to $47000 compared to earlier $46000.
Following the correction in March for Suezmax, rates
for the same recovered 16% in April to | 28000
levels. Aframax and Clean corrected 19% and 2%,
respectively

Asset class

CY14

CY15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

20178

54876

58328

81155

51591

41355

46228

47162

Tankers
VLCC
Suezmax

11488

29777

37879

37121

32555

27220

24380

28233

Aframax

11972

23390

24932

30130

22413

18971

21272

17127

5903

14818

11293

13363

11225

10231

10786

10574

Clean
Bulk Indices
BDI continued to recover for a second consecutive
month. During April, the Baltic Dry Index (BDI) grew
62% MoM to an average of 621 levels. Capesize
witnessed the major recovery with indices more than
doubling to 630 levels. Consequently, Panamax,
Supramax and Handysize grew 43%, 16% and 15%,
respectively

Baltic Dry index

1016

746

586

519

386

307

383

621

Capesize

1875

1169

873

718

278

203

187

630

Panamax

855

719

545

429

379

324

445

637

Supramax

883

678

535

456

387

280

424

493

310

279

244

197

251

288

Handysize
469
366
Source: Bloomberg, ICICIdirect.com Research.

Exhibit 2: China's monthly iron ore inventory

120

For April 2016, Chinas inventory of iron ore grew 3%

MoM (down 1% YoY) to 92.2 MT. Following the pent
up inventory in the current month, stocking activities
for the rest of the year are expected to be volatile

mn tonnes

100
80
60
40
20

Apr-16

Oct-15

Apr-15

Oct-14

Apr-14

Oct-13

Apr-13

Oct-12

Apr-12

Oct-11

Apr-11

Source: Bloomberg, ICICIdirect.com Research

Exhibit 3: Country wise China iron ore import

70
60
50
mn tonnes

Chinese iron-ore imports for March grew 16.5% MoM

(up 6.5% YoY) to 85.8 MT. On a YTD basis, imports were
at 227 MT compared to 241.6 MT in the same period of
the previous year. Albeit lower base imports from India
grew the most with 2.3 MT on a YTD basis compared to
0.6 MT in the previous year. Australia continues to
command a lions share of the total imports

40
30
20
10

Australia

Brazil

India

Mar-16

Nov-15

Jul-15

Mar-15

Nov-14

Jul-14

Mar-14

Nov-13

Jul-13

Mar-13

S. Africa

Source: Bloomberg, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 2

Exhibit 4: China iron ore inventory trend analysis

1250

Average monthly iron ore imports grew 1% to 80.5

MT, which continues to remain significantly above
the six year average level of 61.6 MT

100
933

1000
750

628

52.4

619

687
51.6

745
57.2

820
62.1

953
80.5 80

79.4

77.8

68.4

60

500

40

242

250

20

China Iron Ore Imports

CY16

CY15

CY14

CY13

CY12

CY11

CY10

CY09

Avg Monthly Chinese iron ore imports

Source: Bloomberg, ICICIdirect.com Research

Exhibit 5: Chinas monthly steel production

80
70
60
mn tonnes

Chinese monthly steel output remained flattish MoM

to 60.53 MT in March 2016. The YTD (January to
February) output de-grew 7% YoY to 121 MT
compared to 130 MT in the earlier year

50
40
30
20
Feb-12

Aug-12

Feb-13

Aug-13

Feb-14

Aug-14

Feb-15

Aug-15

Feb-16

Source: Bloomberg, ICICIdirect.com Research

Exhibit 6: Coal Index

1400
1200
1000
Index

The World Coal Index and Asia Pacific Coal Index

continued to decline from July levels. On the back of
subdued manufacturing and trade activities the index
sequentially remained sluggish for April

800
600
400
200
0
Apr-13

Aug-13

Dec-13

Apr-14

Aug-14

BWCOAL Index

Dec-14

Apr-15

Aug-15

Dec-15

Apr-16

BPRCOAL Index

Source: Bloomberg, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 3

Exhibit 7: Dry bulk indices

3000

1000

BDI

Apr-16

Oct-15

Apr-15

Oct-14

Apr-14

Oct-13

Apr-13

Oct-12

0
Apr-12

The fortnight value for BDI reflects a sharp recovery

with more than 250 bps rise. However, following the
continued subdued trade scenario and additions
marked during the year, we expect BDI to remain at
distressed levels

2000
Index

During CY15, we have seen BDI being volatile,

growing from 596 to 900 levels by September 2015.
However, as the trade scenario in China worsened,
this resulted in downward pressure on BDI. During
the month, BDI recovered a bit and returned to around
January levels

BPI

Source: Bloomberg, ICICIdirect.com Research

Exhibit 8: Tanker indices

1400

1000
Index

The average BCTI and BDTI levels for April reflected

an inverse correlation. Though BCTI improved 4.5%
MoM to 525 levels, BDTI declined 4% MoM at 770
levels. However, on a YoY basis both indices were on
a declining mode with a correction of 16% and 3%,
respectively

600

Baltic clean tanker index

Apr-16

Oct-15

Apr-15

Oct-14

Apr-14

Oct-13

Apr-13

200

Baltic dirty tanker index

Source: Bloomberg, ICICIdirect.com Research

Exhibit 9: International crude oil prices trend

140
120
100
$/barrel

Average crude price for April 2016 grew 8% MoM to

$42, compared to an average of $39 in March 2016
and $33 in February 2016. Notably, the prices for
crude rebounded for the fourth consecutive month

80
60
40
20
0
Apr-12

Dec-12

Aug-13

Apr-14

Dec-14

Aug-15

Apr-16

Source: Bloomberg, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 4

Exhibit 10: Tanker rates trend

90000
80000
70000
60000
US$/day

Post a sharp decline in January and February, freight

rates in March and April rebounded. Average annual
freight rates for April 2016 for VLCC and Suezmax
sequentially grew 2% and 12%, respectively.
However, Aframax, post a sharp recovery in March,
rates in April de-grew 19%

50000
40000
30000
20000
10000
0
Apr-13

Aug-13

Dec-13

Apr-14

Aug-14

VLCC

Dec-14

Apr-15

Suezmax

Aug-15

Dec-15

Apr-16

Aframax

Source: Bloomberg, ICICIdirect.com Research

Exhibit 11: Container volume at major ports

(000's TEUs)
Container volumes at major ports remained subdued
over the last two years with FY13 remaining flat YoY and
FY14 registering a decline of 4%. FY15 has shown a mild
recovery with container volumes at major ports
increasing 7% YoY
For February, container volumes posted a spirited
growth of 10% YoY to 673000 TEUs. Following this, the
YTDFY16 growth for container volumes improved from
2.1% to 2.8%

FY12

FY13

FY14

FY15

FY16

YTDFY16

Kolkata

600

552

563

630

662

44

60

36.4%

Paradip

13

-100.0%

Vizag

248

234

263

248

293

20

26

30.0%

Ennore

Chennai

1539

1558

1468

1552

1565

139

125

-10.1%

Tuticorin

479

477

508

560

612

48

52

8.3%

Cochin

326

336

351

365

421

31

41

32.3%

New Mangalore

48

45

50

63

76

25.0%

Mormugoa

20

22

22

25

26

0.0%

Mumbai

YTDFY17 YoY Monthly

0.0%

58

58

41

45

43

100.0%

JNPT

4259

4321

4161

4460

4491

369

370

0.3%

Kandla

118

168

29

0.0%

Total

7708

7779

7465

686

3.9%

7952

8197

660

Source: Indian Ports Association, ICICIdirect.com Research

Exhibit 12: Container volume at major ports

800
750
700
('000 TEUs)

For April 2016, container volumes at major ports grew

4% YoY (down 8% QoQ). Volumes at JNPT (largest port)
remained flat. However, Chennai de-grew 10% YoY.
Smaller ports like Kolkata (up 36% YoY) and Tuticorin (up
8% YoY) took the lead in volume recovery in April

650
600
550

Apr-16

Feb-16

Dec-15

Oct-15

Aug-15

Jun-15

Apr-15

Feb'15

Dec'14

Oct'14

Aug'14

June'14

Apr'14

Feb'14

500

Source: Indian Ports Association, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 5

Exhibit 13: Railways segment-wise earnings

Indian Railways passenger revenues for FY2016 grew 4%
YoY to | 163650 crore compared to budgeted estimate (BE)
of | 167780 crore. Passenger and goods revenues grew 6%
and 4%, respectively
Indian Railways passenger revenues for April 2016 de-grew
10% YoY. Passenger and goods revenues de-grew 5% and
13%, respectively. Post de-growth in revenue, contribution
from freight declined from 67% to 65% in April 2016. The degrowth could be due to a removal of port congestion
charges and busy route surcharge

| Crore
Passenger
Other Coaching

FY12

FY13

FY14

FY15

FY16

YTDFY16

28631.5

32536.1

37478.3

42866.2

45355.5

4013.7

YTD
YTDFY17 Growth (%)
3818.3

-5%

2848.6

3197.9

3818.0

4035.6

4468.9

349.0

382.2

10%

Goods

69382.2

86255.4

94955.9

107074.8

110347.0

9552.5

8334.1

-13%

Sundry

2828.3

3913.2

4509.0

3903.9

3477.8

210.0

212.1

1%

Total
103690.7 125902.6 140761.3
Source: Indian Railways, ICICIdirect.com Research

157880.5

163649.1

14125.2

12746.7

-10%

YTD
YTDFY17 Growth (%)

Exhibit 14: Railways commodity wise earnings

| Crore
Coal
RM for steel plants
except iron-ore
Pig Iron &
Finished Steel
Earnings for railways for FY16, de-grew 13% YoY to | 8234
crore. Majority of de-growth was from coal, which is the
largest contributor to earnings. Contribution from Coal
declined from 49% in April 2015 to 44% in April 2016.
However, other commodities like cement & fertilisers
experienced downward pressure

FY12

FY13

FY14

FY15

FY16

YTDFY16

28611.6

36802.4

39986.9

48373.4

49988.8

4623.8

3612.2

-22%

1163.7

1387.3

1560.8

1875.0

2022.8

178.7

142.5

-20%

4080.7

5182.1

5805.3

6409.1

7046.5

554.5

553.1

0%

Iron Ore

7285.0

7421.3

9163.4

7904.7

7072.6

573.1

642.9

12%

Cement

6719.7

8229.2

8665.3

9181.8

9154.6

873.0

701.7

-20%

Foodgrains

4634.2

6792.2

7894.4

8550.4

7811.3

570.2

652.6

14%

Fertilizers

4270.8

4732.1

4536.0

5431.1

6920.0

475.1

345.9

-27%

POL

3667.3

4720.3

5405.7

5705.8

6003.1

502.1

527.8

5%

Other Goods

5115.3

5684.4

6111.4

7013.9

7777.5

106.2

95.4

-10%

921.2

953.8

1239.9

1258.9

1248.8

339.7

341.9

1%

EXIM Container

2495.9

2879.6

3098.7

3610.3

4234.4

445.8

437.3

-2%

Total Container

3417.1

3833.4

4338.6

4869.2

5483.2

665.3

619.9

-7%

Grand Total
68965.4
84784.7
93467.7
Source: Indian Railways, ICICIdirect.com Research

105314.4

109280.3

9461.5

8235.9

-13%

Domestic Container

Exhibit 15: Railways commodity wise tonnage

Over FY11-16, coal tonnage increased at a CAGR of 6%. For

the same period, cement and food grains volume has
increased 1% and 2%, respectively. Coal tonnage as a
percentage of total volume has increased from 44% in FY10
to 50% in FY16 whereas iron ore tonnage has declined from
15% in FY10 to 10% in FY16
For April 2016, coal tonnage contribution to total tonnage
was at 50%. Total tonnage for March de-grew 4% YoY.
Majority of de-growth came from cement and fertilisers.
Container volumes for EXIM route grew 9% but for domestic
route it de-grew 18%. Promotion of shipments via coastal
route could have led to this decline

FY13

FY14

FY15

FY16

YTDFY16

Coal
RM for steel plants
except iron-ore
Pig Iron &
Finished Steel

455.81

496.37

508.08

545.67

551.6

46.1

43.1

-6%

14.53

15.68

17.3

18.37

20.3

1.6

1.6

-5%

34.53

35.33

38.57

39.89

42.7

3.4

3.4

3%

Iron Ore

104.71

111.54

124.23

112.72

117.0

9.0

10.3

15%

Cement

107.57

105.78

109.85

110.29

106.1

9.4

8.1

-14%

Foodgrains

45.61

48.29

54.41

54.98

45.8

3.3

3.4

2%

Fertilizers

52.74

45.93

44.37

47.42

52.3

3.4

2.8

-19%

POL

41.18

41.62

41.99

42.77

44.0

3.5

3.8

9%

9.34

9.27

10.94

10.41

9.0

0.8

0.6

-18%

EXIM Container

29.11

31.89

32.59

38.32

37.1

3.0

3.2

9%

Total Container

38.45

41.16

43.53

48.73

46.1

3.7

3.9

4%

Other Goods

74.32

68.12

71.21

76.72

78.0

6.5

6.1

-5%

Grand Total
969.45
1009.82
1053.54
Source: Indian Railways, ICICIdirect.com Research

1097.56

1104.0

89.8

86.5

-4%

Domestic Container

ICICI Securities Ltd | Retail Equity Research

YTD
YTDFY17 Growth (%)

FY12

Million Tonnes

Page 6

ICICIdirect.com coverage universe (Shipping)

Sector/Company
G.E Shipping
Reliance Defence & Eng.
SCI
Dredging Corp Ltd.

CMP
(|)
307
63
71
387

TP (|)
325
80
65
500

Rating
HOLD
BUY
HOLD
BUY

Mcap
(| Cr)
4,674.2
4,859.0
3,307.2
1,083.6

EPS (|)
P/E (x)
FY15 FY16E FY17E FY15 FY16E FY17E
49.6 83.5 82.1
7.1
3.9
4.0
-5.0
-8.0 -3.1
NA
NA
NA
4.3 10.0 10.1 23.0
9.9
9.8
22.3 22.5 32.6 17.4 17.2 11.9

EV/EBITDA (x)
FY15 FY16E FY17E
5.6
3.5
3.6
139.7 -77.4 39.5
8.2
5.8
5.7
10.9
10.7
9.2

RoCE (%)
FY15 FY16E FY17E
6.3 10.2
8.7
-1.4 -4.1
0.5
0.5
3.4
3.3
6.8
7.1
8.1

EV/EBITDA (x)
FY15 FY16E FY17E
17.0 18.9 15.0
10.6 11.7 10.0
64.3 35.9 30.3
10.5 11.4
9.2
14.3 19.3 14.7

RoCE (%)
FY15 FY16E FY17E
12.0 10.1 12.2
19.8 20.0 19.9
28.0 38.0 40.6
11.2 11.6 13.4
22.8 13.2 16.8

RoE (%)
FY15 FY16E FY17E
10.1 14.8 12.9
-26.9
-9.4 -1.1
2.7
6.6
6.3
4.3
4.1
5.4

Source: ICICIdirect.com Research

ICICIdirect.com coverage universe (Logistics)

CMP
M Cap
Sector / Company
(|)
TP(|) Rating (| Cr)
1,360 1,700
BUY 26,711
Container Corporation
280
280
BUY 1,778
Transport Corp (TRACOR)
5,490 7,300
BUY 14,636
BlueDart
130
150
BUY 1,047
Gati Ltd.
153
195
BUY 7,831
Gujarat Pipavav (GPPL)
Source: ICICIdirect.com Research

EPS (|)
P/E (x)
FY15 FY16E FY17E FY15 FY16E FY17E
53.7 46.4 56.8 23.5 28.4 23.2
10.8 12.6 14.0 21.5 19.2 16.4
53.5 81.2 92.6 112.1 70.8 62.1
4.7
4.2
5.2 25.3 28.6 23.1
8.0
5.1
6.3 19.1 33.1 26.7

ICICI Securities Ltd | Retail Equity Research

RoE (%)
FY15 FY16E FY17E
13.7 10.9 12.2
13.1 14.0 13.8
42.7 45.0 42.2
6.3
6.6
7.8
21.6 12.1 13.0

Page 7

Glossary
Tankers
VLCC

Very large crude carrier - capacity 300000 DWT

Suezmax

Capacity 120000 to 200000 DWT

Aframax

Capacity 80000 and 120000 in DWT

Small Tankers

Capacity 10000 to 60000 DWT

Bulkers
Capesize

Capacity 80000 to 200000 DWT

Panamax

Capacity 60000 to 100000 DWT

Handymax

Capacity 40000 to 60000 DWT

Handysize

Capacity 10000 to 40000 DWT

Offshore
Drill ship

Offshore drilling vessel capable to drill in water depths up to 6000 meter. (Deepwater drilling)

Semi submersible rig Offshore drilling vessel capable to drill in water depths up to 2000 meter. (Deepwater drilling)
Jack up rig

Offshore drilling vessel capable to drill in water depths up to 350 meter. (Shallow water drilling)

AHTS

Anchor handling tag supply vessel used for positioning of jack up rigs.

PSV

Platform support vessel used for transport of men and material to oil platform and jack up rigs.

LPG
VLGC

Very large gas carrier capacity 70000+ CBM

LGC

Large sized gas carrier capacity 50000 - 70000 CBM

MGC

Mid sized gas carrier capacity 20000 - 50000 CBM

Miscellaneous
DWT

Dead weight tonne

LDT

Light displacement tonne

TCY

Time Charter Yield measures the operating profit of a ship on a daily basis.

TEU

Twenty-foot Equivalent Units

ICICI Securities Ltd | Retail Equity Research

Page 8

RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Sector view:
Over weight compared to index
Equal weight compared to index
Under weight compared to index
Index here refers to BSE 200

Pankaj Pandey

Head Research

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No. 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research

Page 9

ANALYST CERTIFICATION
We /I, Bharat Chhoda, MBA; Ankit Panchmatia, MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately
reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this
report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking
and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is Indias largest private sector bank and
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and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts
and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
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temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this
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material conflict of interest at the time of publication of this report.
It is confirmed that Bharat Chhoda, MBA; Ankit Panchmatia, MBA, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding
twelve months.
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ICICI Securities Ltd | Retail Equity Research

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