Allcargo Logistics Ltd
(BSE Code: 532749) (CMP: Rs.165.05) (FV: Rs.2) (TGT: Rs.200+)
Allcargo Logistics Ltd (ACLL) is a holding company engaged in providing integrated logistics solutions. It offers logistics services across multimodal transport operations (MTOs), inland container depot (ICD), container freight station (CFS) operations, contract logistic operations and project and engineering solutions. Its segments include Multimodal
Transport Operations (MTO), which involves non-vessel owning common carrier operations related to less than container load consolidation and full container load forwarding activities; CFS/ICD Operations, which involves import/export cargo stuffing, de-stuffing, customs clearance and other related ancillary services; and Project & Engineering Solutions (P&E), which provides integrated end-to-end project, engineering and logistic services through a fleet of owned/rented special equipments such as hydraulic axles, cranes, trailers, barges, reach-stackers, forklifts and ships.
During Q1FY18, ACLL’s revenue grew 6% YoY to Rs.14.83 bn (higher than estimated) due to higher revenue from the MTO segment. EBITDA declined 23% YoY (-2% QoQ) to Rs.1.03 bn (10% miss) due to lower-than-estimated EBIT from the P&E segment on higher provision. PAT was at Rs.630 mn (+1% YoY, +6% QoQ), led by higher other income of Rs.159 mn (+169% YoY, +7% QoQ) and a lower tax rate of 11% (v/s 29.1% in Q1FY17).
CFS volumes stood at 78,732 Twenty Feet Equivalent Units (TEUs) (like-to-like growth of 2% YoY), led by higher volumes in Mundra CFS. EBIT margin contracted ~0.7 bps YoY due to lease rentals of Kolkata CFS and expenses related to new CFS at Mundra.
The P&E segment’s revenue fell 25% YoY on sale of unproductive assets and maintenance of one of the ships. The segment reported EBIT of Rs.1 mn v/s Rs.180 mn in Q1FY17, led by non-operation of assets due to repairs and the sale of low-yielding non-strategic assets.
EBIT margin contracted to 4.1% from 4.3% in Q4FY17 due to currency impact. Revenue grew 9% YoY to Rs.12.9 bn due to strong volume growth. Margin is likely to improve due to the lagged effect of better container freight rates. ACLL is likely to see strong earnings traction in contract logistics, particularly with GST implementation. Given RoE improvement in excess of 5 pp over FY17-FY20E, strong fee cash generation and earnings CAGR of 18%, we believe that valuation of 10x P/E FY20E earnings is extremely attractive.
Technical Outlook The stock looks very good on the daily chart for medium-term investment. It has taken support at the Rs.150 level and has formed a downward channel on the weekly chart. Start accumulating at this level of Rs.165.05 and on dips to Rs.145 for medium-to-long-term investment and a possible price target of Rs.200+ in the next 6 months.