Cold Chain Logistics Stocks: A Bankable Investing Theme?

25 Jan 2021by Aditya Anand Bapat

Cold Chain Logistics Stocks: A Bankable Investing Theme?

The year 2020 saw one of the worst healthcare crisis in recent times for entire humanity. COVID-19 started as a localized infection in Wuhan province of China and soon spread across the globe. It has infected more than 9cr people globally and killed nearly 20 Lakh people, to date. The first half of 2020 was spent understanding the disease, slowing its spread and saving all those who could be saved from its clutches. It was only closer to the end of 2020 that pharmaceutical companies started reporting news about vaccine development and some success.

Dark clouds recede, and finally some sunshine!

Several pharmaceutical companies got into the race for developing a vaccine in the shortest possible time. According to the W.H.O. website (data on 12th January 2021), 63 vaccines are in the clinical development stage, and 173 are in the pre-clinical development stage. Clinical stage implies that vaccines are being tested on humans, while pre-clinical means being tested on animals in the lab. According to the website “livescience.com”, the following are some of the most promising candidates. Some of these are very close to getting emergency approvals; some are ready to get dispatched, while others are still in the trial stage.

 

Vaccine name

Companies / parties involved

Claimed efficacy

ChAdOx1 nCoV-19

(Oxford Vaccine)

University of Oxford, Astrazeneca, Serum Institute of India

70%

CoronaVac

Sinovac Biotech (China)

50.4%

mRNA-1273

Moderna (US), National Institute of Allergy and Infectious diseases

94.5%

BNT162b2

Pfizer (USA), Biontech (Germany)

95%

Ad5-nCoV or

Convidecia

Cansino Biologics, Beijing Institute of Biotechnology

NA

Sputnik V

Gamaleya Research Center (Russia)

91.4%

NA

Sinopharm (China)

79%

NA

Johnson & Johnson's Janssen

NA

NVX-CoV2373

Novavax (US)

NA

Source: Livescience.com.

Note:- Claimed efficacy figures are approximate

New challenges

Humanity has achieved a significant milestone with the development of the vaccine. However, the next biggest challenge lies in effectively distributing and administering it. With the second-largest population in the world and second highest COVID infections globally, India faces a huge challenge ahead of itself. India’s current vaccination infrastructure can only immunise children (26.7mn newborns) and pregnant women (29mn). Hence, vaccinating 1.3bn Indians will be a tall ask. The current distribution infrastructure is capable of distributing only 20-25% of the overall volume. Some vaccines require freezing temperatures (-70C for Pfizer), and almost all of them require temperatures between (-2C and +8C) along with uninterrupted power supply. There are several other challenges that this process faces. We shall focus our attention on the cold chain logistics sector.

Vaccine storage and distribution infrastructure: Getting “cold” feet

Some of India's critical cold storage players are Snowman Logistics, Coldex, ColdStar, Western Refrigeration and JWL Cold Storage Pvt Ltd. Of these; Snowman Logistics is the sole listed player in logistics stocks and also the largest. All others, except Snowman, are localized and smaller players. According to the Hindu Business Line, Snowman has 31 pan-India facilities and already serves drug transportation requirements of Abbott, Bharat Biotech, GSK, Inventia, Novozymes and Zydus. Snowman operates 31 cold storage facilities in 15 cities across India. It has 1,20,000 pallets with each pallet capable of storing 6,000 vaccines, totalling 720mn. Apart from Snowman, listed companies such as Blue Dart Express (through DHL) and Blue Star have shown willingness to develop cold storage facilities going ahead. However, the capacity (whenever it comes up) will hardly move the needle for these companies, at least in the near term. Also, companies face the dilemma of short term spurt versus long term sustenance. Even if capacities are set up in a hurry, what would happen to them once the vaccination drive is over? The vaccination drive would (hopefully) be over after a few rounds of vaccination are done across the country. This will keep these capacities busy for the next 2-3 years. However, the real question will arise afterwards.

Logistics stocks: “Cold Vibes” for investors?

As discussed above, few companies in India can boast of significant cold storage infrastructure. Listed options among logistics stocks are virtually non-existent. This is because up until now, cold storage was limited to transporting poultry, dairy products, medicines and some vaccines, where requirements are less stringent. It will be interesting to see how the entire eco-system evolves in response to the current requirement. Till then, investors will have to wait on the sidelines or look at opportunities elsewhere. And there are bountiful opportunities in the logistics sector or even in other sectors. The key is to capture a good theme at a reasonable time and hold on to it for good enough time. There’s just one thing you need to do to catch a good theme/stock early on………….and that is to get in touch with us! Click here to get started. 

Happy investing!

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