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  • Stock Recommendation | ALLCARGO LOGISTICS LIMITED (ALL) – BUY – Target Price : 145

    Publish date: DECEMBER 7, 2018

    Strong volume trend in both the key segments of Multimodal Transport Operations (MTO) and Container Freight station (CFS) with stable realisations and loss in the project engineering has been the highlights of financial performance for ALL in H1FY19. Healthy performance in H1FY19 has given us confidence of a decent performance in FY19. Also, we believe that most of negatives have got factored in the current price. Maintain estimates with an unchanged target prices of Rs 145 at 15x FY20 earnings.

    The total volumes in the CFS division was reported at 170,814 TEUs (+18.5% YoY). Growth was driven by Kolkata operations and increased share of Direct Port Delivery (DPD) CFS volumes at JNPT. The growth was also because of low base effect.




    Realisation in the MTO segment is a pass through and dependent on freights in the container business. With weak container business, realisations and margins have fallen in the MTO segment. However, volume growth remains strong despite a challenging trade and freight environment.




    The PED division continue to report weak numbers and is a drag on overall profitability of the company. The performance of this segment is highly dependent on private capex cycle which is at low levels currently. Similarly, the contract logistics division is not doing well for the company.


    The company has been increasing its focus on Project Transportation, where the current executable order book is around Rs 1.75 bn. Management believes that renewed revival in 8 core sectors- coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity would help increase the capacity utilization. The company also intends to explore opportunities in neighboring countries like Sri Lanka, Myanmar, Nepal and Bangladesh. It has tasted initial success in Bangladesh & Nepal.


    Management indicated that capex in near term would be restricted to setting up infrastructure at Kolkata CFS, increase MTO reach, setting up rail linked logistics park at Jhajjhar, Bangalore, JNPT and Hyderabad and maintenance capex. Also, ALL may opportunistically spend to make further acquisitions in the MTO segment and towards coastal shipping. If things work-out as per the plans of the management, the above mentioned capex has the capacity to improve the prospects of the company in third-party logistics.


    We believe the business environment in which ALL operates has exhibited structural changes. These changes involve

    1) DPD scheme at JNPT

    2) Continued weak global container trade

    3) Persistently weak private sector capex

    These changes has impacted the overall performance of the company. However, despite that, company has reported improvement in performance in H1FY19. Broadly, we feel the performance of company to remain stable (with a positive bias) over FY18 to FY20E. Strong performance of H1FY19 has given us confidence of decent performance in FY19. Also, we believe that most of negatives have got factored in the current price. Maintain estimates with an unchanged target prices of Rs 145 at 15x FY20 earnings.


    Allcargo Logistics Limited, part of The Avvashya Group, is a global leader in integrated logistics solutions. The Company offers specialized logistics services across Multimodal Transport Operations, Container Freight Station Operations and Project & Engineering Solutions. Benchmarked quality standards, standardized processes and operation excellence across all the services and facilities, have enabled Allcargo Logistics Limited to emerge as the market leader in all these segments. The Company currently operates out of 300 plus offices across 160+ countries and gets supported by an even larger network of franchisee offices across the world.


    BUY - We expect the stock to deliver more than 12% returns over the next 12 months
    ACCUMULATE - We expect the stock to deliver 5% - 12% returns over the next 12 months
    REDUCE - We expect the stock to deliver 0% - 5% returns over the next 12 months
    SELL - We expect the stock to deliver negative returns over the next 12 months
    NR - Not Rated. Kotak Securities is not assigning any rating or price target to the stock. The report has been prepared for information purposes only.
    SUBSCRIBE - We advise investor to subscribe to the IPO.
    RS - Rating Suspended. Kotak Securities has suspended the investment rating and price target for this stock, either because there is not a Sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon.
    NA - Not Available or Not Applicable. The information is not available for display or is not applicable
    NM - Not Meaningful. The information is not meaningful and is therefore excluded.
    NOTE - Our target prices are with a 12-month perspective. Returns stated in the rating scale are our internal benchmark.


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