AllCargo Logistics - Are good time ahead?

Stock Opportunities Not-so-Hidden Gems
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I recently invested 0.25% of my portfolio in AllCargo. Going by the government focus on growth and industries, transport will have to play a major role in it. The company has been growing at 10% and has the highest margin in the industry. It’s Kolkata port will start in Jan-Feb 2017. I will look to invest more once available close to 125-130.

Allcargo’s (AGL) Q3FY16 performance were below estimates with Net profit declining to Rs 615m from Rs 718m YoY. While the operations remained strong in most sectors, increasing marketing spend and one‐off events was the main reason for the lower net income. MTO volumes grew 9.1% to 3,47,152 TEUs in 9MFY16 in a challenging global growth scenario.Decline in freight rates and notional currency impact continued in Q3FY16 (from where it left in Q2FY16), resulting in subdued revenues in MTO. One‐off expenses in terms of opening offices in US, Middle‐East and SE Asia & rebranding exercise carried about ECULINE during the quarter hit the MTO and consol performance. CFS business reported a strong show with 8% revenue growth YoY to Rs1.15bn and more importantly EBIT growth of 24% led by ramp‐up in JNPT 2 volumes, handling of special cargo & firm pricing.This segment has reached margins in excess of 33% for the first time in 36 months. PES business grew 6% YoY in revenues but EBIT saw a 51% decrease on account of two vessels under repair and higher base due to derivative income of Rs 110m booked in Q3FY15.

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Also the rollout of GST should be positive for the company.

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The future of logistics business is linked to all the sectors of the economy. Government has announced plans to invest Rs.70,000 crore in infrastructure in Budget 2015. Infrastructure led growth especially in sectors like power, oil & gas, cement and steel will increase the demand for specialized transport solutions.

Government plans to take wind energy generation to 60,000 MW in the next 5 years from around 20,000 MW currently. It also plans to have 100,000 MW of solar power capacity by 2022. It plans to set up 5 new Ultra Mega Power Projects, each of 4,000MW. US$ 45 billion is expected to be spent on the oil & gas sector in India over the next few years. India is the second largest producer of cement in the world with a current capacity of around 370 MMTPA, which is expected to grow to 550 MMTPA by FY20.

Total market value of the Indian steel sector stood at US$ 57.8 billion in 2011 and is anticipated to touch US$ 95.3 billion by 2016. Currently, metro rails are fully operational in only 2 cities of the 53 Indian cities with a population of more than one million. Almost all the state capitals have plans to build metro railways. Demand for world-class quality supply chains to handle project cargo is expected to increase significantly. Relationship with shipping lines, vast experience in logistics business and presence in other verticals (MTO) should help Allcargo to outperform most of its peers in the CFS segment.

For Q1FY16, net profit rose smartly by 53% to Rs.75.1 crore on 12% higher revenue of Rs.1478 crore. The Q1FY16 EPS is Rs.6 against Rs.3.9 in Q1FY15. During FY15, net profit was Rs.239.9 crore on sales of Rs.5629 crore FY15 EPS stood at Rs.19.

ALL’s equity capital is Rs.25.2 crore and with reserves of Rs.1768 crore, the book value of its share works out to Rs.142. The promoters hold 69.9% in the equity capital. FIIs – Blackstone, Acacia Partners and New Vernon together hold 23.2%. With PCBs holding 1.2% leaves 5.7% with the investing public. ALL plans to add new facilities in North (land has been already identified) and Chennai regions in the CFS/ICD segment. The management expects the CFS industry to grow at 9% CAGR going forward. The management expects the Projects & Engineering segment to gain strong momentum going ahead given the revival in the overall industrial Capex cycle and the government’s increased focus on infrastructure.

Coastal shipping is the next key area of focus owing to the increased interest of the government on in-land coastal shipping. ALL is in the process of acquiring two additional ships, which would lead to nine ships deployed in the segment. Of this five would be owned and remaining four would be on cartel. Container volume in India is expected to be 2x by 2020, driven by EXIM trade and an increase in containerization from the current 55% to >65% (versus developed countries’ average of 70%). Revival in EXIM trade will translate into higher demand for containerization due to their efficiency. Infrastructural initiatives like Dedicated Freight Corridor (DFC) and development of multi-model logistics park, to further support growth of cargo containerization. Several upcoming container terminals are planned at both major and non-major ports - to further increase flow of container traffic. Strong growth expected in CFS container volume with container traffic growing. CFS/ICD business expected to grow by CAGR 9% in coming years.

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Hi,

Can you please provide some more info on the business front, risk associated, capacity expansion, future plans, mgmt quality, etc.

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Sorry Abhishek. I am not an analyst and hence could only cover that I could understand about the company. I think I have already included a bit about its expansion plans, the risk in logistics always remains in India’s economic activity revival.

So whenever corporate India starts showing growth, I believe many of leading logistics companies will start showing in better numbers.

The idea of sharing my post here was to invite more insights from others as well which are beyond the topics covered herein. I had liked the company’s past growth and the fact that the company has the highest margin in the Industry. Also their Kolkata port will start in Jan-Feb 2017, hence thought of covering this company since I did not see any post for this company.

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http://economictimes.indiatimes.com/news/economy/infrastructure/allcargo-logistics-consolidates-contract-logistics-business/articleshow/53859231.cms

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1485514946285802048525.jpg4608×3456 1.91 MB

Please go through the screenshot captured from business India magazine…Will explore more on this…

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AllCargo CMP / BV 1.84 & P/E 16.76 , looks one of the cheapest stock in the sector. Hoping GST getting implemented soon, AllCargo should do well.
Disclosure : Invested 0.5 % of my Portfolio in Allcargo.

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I think we should merge this thread with Allcargo Logistics- DEMERGER

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Contract logistics & land monetization will add value to Allcargo: Motilal Oswal
It is our good fortune that we don’t have to rely solely on Porinju’s advice but also have the benefit of expert opinion to help us come to a decision.

Abhishek Ghosh and Pradnya Ganar of Motilal Oswal have conducted a detailed study of the innards of Allcargo Global and recommended a buy on the following logic:

“Contract logistics, land monetization to add value

Management initiatives to improve return ratios

– We expect AGLL to create value in the medium term from strong growth in contract logistics through its subsidiary, ACCI. Monetization of land parcels by roping in strategic partners would add further value to the company.

– The MTO segment should continue to see growth in profits, led by strong revenue growth due to rising proportion of FCL shipments coupled with stable margins. Also, the management has taken multiple initiatives, which should result in an improvement of the company’s overall return ratios.

– AGLL trades at 11x FY20E EPS, which is attractive, given improving return ratio profile and 16% earnings CAGR over FY17-20E. We value AGLL on 14x FY20E EPS and arrive at a target price of INR213, implying 25% upside. We believe an additional value of 25-30% of present market capitalization could get created in the medium term from contract logistics, land monetization and entry into last mile delivery, which we are not factoring into our present target price. Maintain Buy.

Contract logistics the way forward for domestic business

We expect a paradigm shift in contract logistics in India. With rising dependence on third-party logistics (3PL), this segment should witness robust growth. Organized large-sized players are scarce in this space and AGLL has a three-pronged strategy to cement its early mover advantage:

  1. Organic growth: AGLL has created a niche for itself in contract logistics, with strong exposure to Autos, Chemicals, E-commerce, fashion and Retail. This also helps improve AGLL’s overall profitability profile, as margins in these segments are higher. Additionally implementation of GST is expected to give a big demand boost to contract logistics business in the country.

  2. Acquisitions in last mile delivery: AGLL foresees good prospects in express delivery for e-commerce players – Amazon and other key clients are likely to increase business to 3PL players. AGLL intends to invest upto INR2b towards acquisition, which will give them access to last mile connectivity particularly for B2C segment as they have exposure in B2B segment.

  3. Monetization of land parcels in key strategic locations: AGLL intends to develop 500 acres of land bank in multiple locations like Hyderabad, Bangalore, Chennai, Jhajjar and Nagpur into warehouse complexes, Logistics parks along with strategic partners. It intends to follow an asset-light model in this activity with major capex could be incurred by the strategic partner expected to come on board.

MTO segment profitability continues to improve

AGLL’s multi-modal transport operator (MTO) business generates annual free cash flow of over INR2b, led by low capex requirement and steady growth. The segment has witnessed significant improvement in profitability over the last 2-3 quarters, led by revival in container shipping freight rates globally. Rates have firmed up due to consolidation of container shipping companies and demand recovery after prolonged weakness. This bodes well for the segment’s prospects in the medium term; profitability should improve over the next 12-18 months.”

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The MMB punters have opined out that the exorbitant valuations being demanded by Mahindra Logistics of 66.9x FY17 EPS for the IPO will put the focus on the cheap valuations at which Allcargo is quoting (17.71x) and spur demand for the stock.

Prima facie, there is merit in the theory of the MMB punters.

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Allcargo-Logistics-Investors-Presentation-Research-Report.pdf (1.4 MB)

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Researched ALLCARGO and TIGER LOGISTICS

I analyzed Allcargo logistics and found it has better expansion capability, wider market reach and is quoting at almost the same price. Spoke to the senior management at Allcargo and was surprised by their honest opinion. I am trying to understand if Allcargo has got the right valuation from the market or am I missing something…
Comparing Tiger Logistics and Allcargo, I found Allcargo to be a better bet but the experts on this esteemed forum, please correct me here.

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Can you please let us know what was discussed with the senior management which might help the forum.

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All Cargo is an excellent buy for long term investor. Valuation is attractive. Future looks bright.
They have their own land ( which can be used for warehouse) in most major cities of India.
Disclosure: holding stock from last 1 year from 180 level.

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I’m evaluating allcargo and Navkar and a few things dont add up.
From the reports it looks like Allcargo has more than 5L TEU (CFS/ICD)handling capability which is more than Navkar as on date.
85% of revenue for AllCargo is coming from LCL while Navkar’s main revenue is coming from CFS/ICDs only.
Debt for both the companies are nearly the same .
Allcargo has a much larger market cap.
Yet, their sales turnover isn’t much more than Navkar.

Any opinions guys?
I’m really interested in these 2 companies now. :slight_smile:

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Any reason why stock has taken such a hard beating? I read on another thread that Changes in regulation expediting release and delivery of imported containers has caused it.

But 85% of its revenue comes from foreign subsidiary. So there has to be some other reason.

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@santoshj

i just found the below article which will ease the tension out for all cargo and the logistics company

Let me know your thought on this

Customs allows all freight stations at JNPT to handle uncleared DPD boxes

Disc : tracking all cargo, and new to share market investments

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In my humble opinion,cargo companies will adapt to the new regulations,and in the long run company with honest management like Allcargo Logistics will be valuable investment.