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  • Stock recommendation: Allcargo Logistics Ltd – BUY – TP Rs.145

    Publish date: August 14, 2018

    Result Update

    Improved quarter - 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 division were the highlights of the results in Q1FY19 for ALL.

    Key Highlights

    • Strong volume growth in the MTO at 174043 TEUs (+25.7% YoY), healthy volume trend in the CFS division at 82210 TEUs (+4.4% YoY), stable realisations and loss at EBIT level in the Project and Engineering Solutions divisions (PES) led to stable performance for ALL in the quarter.
    • Sales was reported at Rs 16.25bn (+9.5% YoY/+5.8% QoQ), EBIDTA margin at 6.3% (+150 bps QoQ/-60 bps YoY) and PAT of Rs 543 mn above our expectation of Rs 392 mn.
    • Depreciation, interest cost, other income and taxes were stable for the company during the quarter.
    • Improvement in financial performance in Q1FY19 was mainly on account of strong volume trends in the MTO segment, contribution to CFS volumes from the Kolkata CFS and stable realisations. Performance of the PES division remains a drag on the overall performance of the company.

    Valuation & Outlook

    • We believe the performance of FY18 of ALL is a reflective of structural changes in the container freight station business, which we believe would be a feature in medium term. The profit margin in the MTO segment is capped due to the pass through nature of realisations in the segment. While the project engineering division would continue be a drag, unless the private sector capex picks-up.
    • Broadly, we feel the performance of company to remain stable (with a positive bias) over FY18 to FY20E. The current quarter outperformance 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.


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