Categories Analysis, Other Industries

Patel Integrated Logistics Off Highs Post Earnings, Should You Buy?

Patel Integrated Logistics Limited (NSE:PATINTLOG) share price declined by almost 20% after the results were announced. On July 28, the price reached a high of ₹19.55, and it is currently trading at ₹15 levels.

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Q1 Earnings

Patel Integrated Logistics Limited reported a net profit of 111.35 lakhs, a significant increase from the previous year’s loss of 80.81 lakhs. In comparison to negative margins during the same quarter last year, the net profit margin is now at 1.6%. Operating revenue for the business increased by 40% year over year, from 5,106.92 lakhs to 7,139 lakhs.

Company Summary

Patel Integrated Logistics Limited, founded in 1962, is part of the House of Patels group. With presence across 500 stations across the nation, they offer prompt, dependable service while adhering strictly to delivery schedules. The company currently transports cargo worth more than Rs. 120 billion annually and has more than 75,000 clients, ranging from small businesses to multinational corporations. The logistics service offering, combined with cutting-edge tracking systems, allows them to maintain a competitive advantage.


Investment Summary

India has been growing as the global center for manufacturing. Once a product is created, it must be transported from the point of production to the consumer. So, as India’s production of goods rises, so does the need for logistics. Patel Integrated Logistics Limited has the infrastructure to meet India’s logistic demand. In addition, the company is expanding its warehouse space in various locations across the country. The offerings from Warehousing and Distribution services will add a boost to the company’s growth. Moreover, the business’s profitability and revenue have begun to rise year over year. However, the recent trend of the promoter’s shareholding decreasing is seen as a red flag.


Air Freight Industry Outlook

The global air freight market was estimated to be worth $270.2 billion in 2019 and is expected to reach $376.8 billion by 2027, registering a CAGR of 5.6%, according to the “Air Freight Market” report from Allied Market Research. However, the market for air freight in India is projected to be worth $12.41 billion in 2022 and to grow slightly faster at a CAGR of 5.7% to reach $16.37 billion by 2027. Air cargo moved 15% of the volume of e-commerce, according to estimates from the IATA (International Air Transport Association). The players in the air cargo industry will directly benefit from India’s expanding e-commerce market.

The cost of air freight is typically 4–5 times higher than that of road freight and 12–16 times higher than that of sea freight. Air transport is used to transport goods with a high value or that must be delivered quickly, such as pharmaceuticals, clothing, production samples, and perishable goods like produce and seafood. Consolidated freight services, which are more affordable than standard air freight services, are another popular option provided by air cargo players.


Improvement in Company’s P&L

The company’s operating revenue decreased by more than 50% between FY17 and FY21. However, between FY21 and FY22, operating revenue increased by 10.3%, going from 21225 lakhs to 23401 lakhs. In the same time frame, the net profit multiplied year over year, rising from 5 lakhs to 227 lakhs. Reductions in finance costs and employee benefit expenses were the main drivers of the net profit growth. Refer to the graph below:

Operating revenue increased by almost 40% in Q1 2023, going from 5107 lakhs to 7139 lakhs. In comparison to last year’s loss of 81 lakhs, the net profit for this quarter is 111 lakhs. High operational and employee benefit costs were the cause of the previous year’s same quarter’s negative earnings. In the most recent quarter, these costs saw a significant reduction.
The company’s profitability should increase if the trend toward cost optimization persists.


Patel Integrated Logistics’ Warehousing Services

In addition to providing services in cargo and vendor management, the company also offers services in warehousing and distribution, manufacturing logistics, and C&F management since 2017. They have storage space totaling over 200,000 square feet spread across several locations. The company has leased a warehouse in Bangalore for 99 years, and it has also bought land in Chennai to construct a storage facility on. The business rents out warehouses to different industries based on their needs, from short-term leases of 10 years to long-term leases of 40 to 99 years.

By adding more warehouse space to the existing infrastructure, the company should be able to increase the contribution of warehousing service’s income to overall revenue.


Patel Integrated Logistics Shareholding Pattern

The promoters’ shareholdings decreased from 46.02% to 41.08% over the past nine years. Currently, individual shareholders make up the majority of the 58.92% public shareholding. The Institutional Investors, specifically mutual funds holding was only 0.06% by FY18. As of FY22, the mutual funds have not expressed interest in this stock and have no holdings in the company.

It is a good sign when the promoters have a sizable stake in their company’s shares because it demonstrates their confidence in it. Additionally, interest shown from institutional investors in a company, draws more demand from individual investors, which results in higher valuation and liquidity in the shares.

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