According to Barclays Research, traffic correction for fourth quarter of FY15 is adjusting for higher than expected imports during second and third quarter and expects traffic data to again recover from July 2015 onwards.
It expects Adani Ports to benefit from higher coal imports during the quarter which should offset any container traffic weakness. Lower container traffic may impact Gujarat Pipavav Port (GPPV) and Container Corp Of India (CCRI) in near term. Also, it remains positive on CCRI in the medium term as DFC construction and JNPT expansion progresses. It expects IRB to benefit due to its west India heavy portfolio among toll road operators.
Container traffic disappoints in fourth quarter of FY15: While private ports and container rail operators are yet to report fourth quarter numbers, initial trends from government ports and Indian Railways are not encouraging. Container traffic at major (government) ports grew at only 2.1% y/y in fourth quarter against 8.9% and 11.9% in second and third quarter respectively. Container traffic at Indian Railways grew by only 2.9% during the quarter (till Feb) as both exim and domestic traffic fell. It believes this correction may be due to the unwinding of higher imports following the formation of the new government during second and third quarter of FY15.
Road traffic likely to show mixed trends: While Indian road traffic growth has improved at a good pace (from 1% in FY14 to 5% in previous three quarters). It believes that road traffic on the west coast is benefiting from freight increase by Indian Railways and lower diesel prices. Despite container and Indian Railways bulk traffic coming down in fourth quarter, we expect west India dominated road operators to show healthy traffic trends.
Bulk traffic supported by coal: Bulk traffic at ports and railways has come down sequentially during fourth quarter of FY15 despite increase in coal imports. Government ports bulk traffic increased by 3.5% y/y in fourth quarter from 6.8% in third quarter of FY15 while coal imports in India increased by 33% y/y.
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