AllCargo Logistics - Are good time ahead?

Here what value, a rerating after the proposed demerger might unlock


Apparently, according to management QoQ numbers are muted due to seasonality (the previous quarter includes the peak holiday shopping season, this quarter is low due to Chinese New Year and other issue)

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During the gati conference call, management mentioned about the restructuring and further consolidation within the enterprise. PFB. I have not attended allcargo conference call did they mentioned anything about this

Harsh Jhanwar: Hi Sir. Thanks for the opportunity. Sir I want to know are we planning to merge the APPI division of Allcargo with Gati. I just wanted to know are we looking to merge the division of Allcargo with Gati business and what is the reason behind it?

Pirojshaw Sarkari: As I said in my note that board has approved evaluation of restructuring options on appointments of consultants and advisors. We are at preliminary stage just now. Of course if you ask me conceptually contract logistics and express logistics go hand in glove and customers more and more want a single operator who can take end to end fulfillment of their finished goods so we are evaluating this. We have a partner with KWE and we will be in discussions with them very soon.

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They are keeping cards close to the chest. They are exploring buying out the stake from KWE, then probably may merge gati it into Allcargo. All asset light units of the conglomorate will become one entity. All real estate and asset heavy will be Transindia (including those in Gati perhaps).

DISC - Invested, quite a bit at around 346 avg price in Allcargo, no units in Gati. Not a recommedation, I am an IDIOT and a rank amateur.

Gati Express is a B2B segment that cannot be directly compared to bluedart, Delhivery etc. But still the PE rating of all these companies and that of the Allcargo conglomorate is quite low at ~7.

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If you look at the mix of businesses across AllCargo and Gati, there are around 5 different distinct areas. After the current restructuring, the logistics business is still split between Allcargo, Gati, and Gati KWE. My understanding is they want to bring this under one roof. But it would take a while, given Gati and Allcargo are separate listed entities and KWE has a stake in Gati KWE too. The rationale is pure logistics business which is high growth should get better valuations.

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Very detailed PPT shared by company today. Interesting stuff in last few pages regarding post demerger business metrics …

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Allcargo ticker went on a tear last few sessions. I first bought at 367 and kept on averaging down as it fell to almost 250. No news except for the superb investor presentation. I hope maybe some big buyer has started loading, who knows.
I am eagerly awaiting Q2. ECU revenues appear to be leveling off, worldwide cargo prices dropping significantly. TransIndia segment is still very opaque and very low ROCE. I would love to hear thoughts from those who understand this better. Not clear how the capital employed splits between project division cranes and logistic parks etc.

DISCLOSURE - Invested, just got real lucky. I am a rank amateur and an idiot. My posts are NOT a recommendation of any kind

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Analyst Meet Video. Very impressive presentation. But still the doubt lingers if the perfroance is temporary.
Allcargo Analyst Meet 2022: Powering transformational growth for the future - YouTube.
Disclosure Not invested. Not a recommendation but only academic interest.

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