reuters code 357.7/137.75 bse code 532749 3907.48cr nse … · 2015-03-27 · allcargo had...
TRANSCRIPT
Add Value By Smart Investing 1 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
Rating BUY
CMP `310.0
Recommended Price `310.0
Target Price `400.0
View 1 Year & Above
Share Holding %
Promoters 69.92
FII 6.15
FI/MF/Insurance Co. 0.03
Bodies Corporate 1.19
Public & Others 22.71
StockData
Market Cap `3907.48Cr
52 Week High/Low `357.7/137.75
Sector Logistics
Bloomberg Code AGLL:IN
Reuters Code ACLL.NS
Bse Code 532749
Nse Code ALLCARGO
Outstanding Shares 126,047,762
Face Value `2
Allcargo Logistics part of the Awashya group is an integrated logistics
multinational, headquartered in India. Allcargo operates across 90 plus
countries through 200 plus offices globally. Allcargo’s service basket
comprises of global Multimodal Transport Operations (NVOCC, LCL, FCL),
pan India Container Freight Stations/Inland Container Depot operations,
Project & Engineering Solutions, Ship Owning & Chartering and 3PL &
Warehousing services.
Allcargo’s Multimodal Transport Operations is the backbone of the company,
with the segment contributing about 85% of the total revenues while it’s
Container Freight Stations and Project & Engineering Solutions businesses
chip in about 7.1% and 8.9% respectively to the operating income.
Over the last few years Allcargo has grown at a staggering pace in the
logistics domain aided by both organic and inorganic growth, to emerge as
the pioneers and leaders in the integrated logistics solutions space in India
and the global leader in LCL consolidation business.
During the first nine months of current fiscal, its consolidated operating
income surged 18.1% over the corresponding period last year to Rs. 4,214.02
crores while its Net Profit grew 33.8% over the 9M FY14 to Rs. 184.41
crores. EBITDA margins inched up 50 basis points to 8.7% during 9M FY15.
Key Triggers
Indian logistics industry is expected to witness healthy growth on the
back of economic revival.
LCL business will drive Allcargo’s future growth through organic and
inorganic growth.
Revival in EXIM trade will likely translate into higher demand for
containerization.
Project Engineering & Solutions business is glaring at a substantial
growth due to expected pick up in infrastructure activities.
Risks
Reversal from the initial signs of U.S. economic growth, slump in
European Union.
Geo-Political risks can pose serious challenge to company’s business.
Add Value By Smart Investing 2 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
Allcargo Logistics is present in
more than 90 countries.
Multimodal Transport Operations
is transport of goods through
various modes of transport viz.
rail, road, sea and air.
MTO segment contributes about
85% of the total revenues.
Allcargo Logistics is an integrated multinational logistics company with
diversified presence across multiple logistics sectors including ocean & air
freight-forwarding, container freight stations (CFS), inland container depots
(ICD), project cargo, equipment rentals, Third Party Logistics (3PL) and
coastal shipping. Allcargo is globally present with more than 200 offices in
90+ countries covering over 4,000 port pairs managed by a strong
management team with experienced industry officials.
Company’s various businesses are housed under three major verticals, viz.
Multimodal Transport Operations (MTO), Container Freight Stations (CFS)
and Project & Engineering Solutions (P&E).
Multimodal Transport Operations (MTO)
MTO is transportation of goods under a single contract, but performed with
at least two different means of transport and where the carrier is liable for
the entire carriage, even-though it is performed by several different modes of
transport (by rail, sea and road). The carrier does not have to possess all the
means of transport and the carriage is often performed by sub-carriers. The
carrier responsible for the entire carriage is referred to as multimodal
transport operator.
Multimodal Transport Operations comprises Non Vessel Operating Common
Carrier (NVOCC) which constitutes Less than Container Load (LCL), Full
Container Load (FCL) and other value added services. MTO business is the
backbone of the company as it contributes about 85% of the total operating
income.
MTO segment involves NVOCC operations related to LCL Consolidation,
FCL Forwarding activities in India and across the world through its wholly
owned subsidiary, ECU Line. Less than Container Load cargo is the cargo
which is insufficient either in quantity or in weight to qualify for the freight
rates applied to a standard shipping container.
Add Value By Smart Investing 3 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
LCL market accounts for about 8%
of the total container trade globally.
LCL Consolidation business
generates high Return on Capital
Employed (ROCE).
LCL Consolidation involves the movement of less than container load cargo
from an inland container depot to a nominated hub terminal under customs
seal. At the nominated, hub terminal, the sealed containers are opened and
the cargo re-worked on a destination wise basis without having to be
subjected to re-examination by customs. In 2012, the LCL market globally
accounted for about 8% of the total estimated container trade of about
600mn TEUs (Twenty Foot Equivalent Units).
LCL Consolidation is the asset light business with high returns on invested
capital, resilient to global market volatility which is evident from the fact
that the Global LCL Consolidation industry grew by 4% - 5% per annum in
last 3 years which were marred by slow economic growth globally.
Add Value By Smart Investing 4 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
Allcargo has made substantial strides to become one of the biggest player
in the niche segment of LCL Consolidation since it first ventured into LCL
Consolidation as an agent of ECU Line in 1995. However, in 2005 – 06, the
company acquired ECU Line which was one of the largest NVOCC in the
world and 4 times larger than Allcargo, at the time of acquisition. Allcargo
had been successful in integrating the ECU Line with itself and on the
success of which it acquired 2 NVOCC operators in China in 2010 which
had extensive operations in Hong Kong, China and other parts of the
eastern region.
As late as in 2013, Allcargo acquired another LCL Consolidator,
Econocaribe Consolidators – 3rd largest NVOCC in the U.S. which has 9
offices and 22 receiving locations in the U.S.A. and Canada, to foray into
the U.S.A and Canada markets and take the pole position in LCL
Consolidation business globally by overtaking Vanguard Logistics Group
of the U.S.A which is the largest LCL operator in the world.
String of acquisitions made by Allcargo has acted as a catalyst to expand
and consolidate its network, gain footprint in major economies of the world
and add more product lines for customers. Income from the MTO division
of the company has grown at a CAGR of 10.6% over FY12 – 14 to Rs.
4,153.98 crores. EBIT Margins has remained steady at 4.7%.
During the first nine months of the current fiscal, income from MTO
division has grown at 17.7% over the same period last year to Rs. 3,591.03
crores while its EBIT margins has increased by 60 bps to 4.7% in 9M
FY15. During the period under review, Allcargo transported about 318,000
TEUs as compared to 335,000 TEUs it transported in the entire of FY14.
String of acquisitions across
geographies enabled it to become one
of the largest LCL Consolidators in
the world.
Acquired Econocaribe Consolidators
to consolidate its position in LCL
Consolidation business in the world
Allcargo has been successful in
integrating the acquired companies
with itself
Add Value By Smart Investing 5 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
Allcargo has elite set of customers from across the world and includes
names like DHL, FedEx Express, Mitsubishi Logistics, APL Logistics,
Nippon Express, Reliance Industries Ltd., Vedanta, NTPC, JSW group,
among others. Asia Pacific region generates maximum MTO business with
the region contributing about 56% while Europe, Americas and Africa
completing the balance pie with contributions of 25%, 19% and 2%
respectively.
Allcargo has adopted a complementary strategy, wherein it depends upon
shipping lines for its Container Freight Stations business and in return it
gives shipping lines container volumes of its MTO business, making both
the parties interdependent on each other for some part of their business
during bad times too.
Company has also set its foot in the FCL (Full Container Load) business
by acquiring 75% stake in the Rotterdam (Netherlands) based FCL Marine
Agencies in 2013. FCL Marine Agencies is a leading neutral NVO service
provider in FCL segment with operations in Europe, U.S.A. and Canada.
Company through its strong network across world, provides complete air
freight solutions including custom clearances through its wholly owned
subsidiary – Hindustan Cargo Limited.
Elite set of customers with the likes
of DHL, FedEx Express, Mitsubishi
Logistics, Nippon Express, etc.
Complementary strategy to develop
CFS business
Add Value By Smart Investing 6 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
CFS and ICD are transit facilities
offering services for containerization
of break-bulk cargo.
Container Freight Stations (CFS)/ Inland Container Deport (ICD).
Container Freight Stations / Inland Container Depot are common user
facilities with public authority status and equipped with fixed
installations, offering services for handling and temporary storage of
import/export laden and empty containers carried under customs control
and with Customs and other agencies competent to clear goods (cargo) for
home use, warehousing, temporary admissions, re-export, temporary
storage for onward transit and outright export.
Functionally there is no distinction between a CFS and ICD as both are
transit facilities, which offer services for containerization of break bulk
cargo and vice-versa through rail and/or road transport. However, an
ICD is generally located in the interiors of the country away from the
servicing ports while CFS is an off dock facility located near the servicing
ports which helps in decongesting the port by shifting cargo and Customs
related activities outside the port area. CFS are largely expected to deal
with break bulk cargo originating/terminating in the immediate
hinterland of a port and may also deal with rail borne traffic to and from
inland locations.
Allcargo had leveraged its relationships with freight forwarders and
major shipping lines by entering into CFs division in 2003 by setting up
its first Container Freight Station at JNPT port near Mumbai.
Currently, Allcargo operates 4 CFSs located at 2 in JNPT and 1 each in
Chennai and Mundra ports and 2 ICDs one in Dadri and one in Kheda
(Indore). CFS/ICD operations of the company involves import / export
cargo stuffing, de-stuffing, customs clearance and other related ancillary
services to both importers and exporters. Allcargo’s consolidated total
capacity of its CFSs and ICDs stood at 633,000 TEUs per annum.
Allcargo Logistics operates 4 CFS and
2 ICDs located in various parts of
India.
Add Value By Smart Investing 7 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
Snapshot of Allcargo’s CFS/ICD facilities
JNPT - I
CFS
JNPT –
II CFS
Chennai
CFS
Mundra
CFS
Kheda
ICD
Dadri
ICD
Nearest Port/Rail
Siding18 kms 18 kms 7 kms 7 kms 3 kms 0.3 kms
Annual Capacity144000
TEUs
145000
TEUs
145000
TEUs
84000
TEUs
40000
TEUs
75000
TEUs
Land Area 23.5 acres 43 acres 24 acres 16 acres 14 acres 11 acres
Paved Yes Yes Yes Yes Yes Yes
Warehouse Area 11400 m2
22800 m2
14257 m2
12210 m2
3100 m2
5160 m2
Bonded Warehouse Yes Yes Yes No No No
Weighbridge Yes Yes Yes Yes Yes Yes
Trailers 130 40 25 45 35 10
Cranes 1 x 70 mt - - 1 x 50 mt - -
Reach Stackers 8 2 6 4 1 1
Forklifts 19 20 22 9 2 2
Reefer Points 32 32 22 15 6 48
RTGC (rubber tired
gantry crane)- Yes Yes - - -
Source: Company
Add Value By Smart Investing 8 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
Allcargo Logistics is one of the
largest CFS operators with presence
at key container ports.
Allcargo is one of the largest CFS operators in India having presence at
key container ports of the country viz. JNPT, Chennai and Mundra which
are in proximity to industrial hubs, carry majority of the volumes and are
preferred choice of customers due to their strategic locations and they
collectively handle more than 75% of container cargo of India.
Allcargo Logistics has developed only about 50% of the land at 2nd CFS at
JNPT and has also land bank of more than 200 acres across 3 strategic
locations viz. Hyderabad, Bengaluru and Nagpur, offering opportunity to
ramp up capacities as demand picks up. Company also continues to
explore opportunities to set-up CFSs at new and upcoming ports and;
establish pan-India ICD presence through strategic JVs. Allcargo’s owned
fleet of trailer, RTGs, reach stackers and forklifts supports transportation
of containers between CFSs and ports.
Add Value By Smart Investing 9 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
CFS business has witnessed pick – up
during the first nine months of FY15.
Revenues from CFS operations have fallen at a CAGR of 4.6% during
FY12 – FY14 to Rs. 320.94 crores and EBIT margins have also come
down to 26.1% in FY14 from 45.8% in FY12. Fall in revenues and
margins are attributed to falling EXIM trade during the period. However
in the first nine months of the current fiscal, revenues from CFS
operations have grown by 23.5% over the corresponding period of
preceding fiscal to Rs. 298.76 crores while EBIT margins have inched up
by 60 basis points from 26.1% at the end of FY 14 to 26.7% during the
period under review.
During the nine months ending December 2015, CFS business handled
volume of 161,000 TEUs as against 187,000 TEUs for the entire fiscal of
2014. Out of the total volume handled in 2014, 80% was related to
imports while balance 20% was of exports.
Allcargo operates its business model with unique synergies between
MTO and CFS businesses as it leases container space with major
shipping lines for its clients in MTO segment and on the other hand, it
gets clients of CFS from the same shipping companies.
Business model synergizes MTO and
CFS business.
Add Value By Smart Investing 10 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
Fleet Strength
Equipment Type As on 31st March 2014
Trailers 585
Hydraulic Axles 201
Cranes 143
Reach Stackers and Forklifts 79
Prime Mover 20
Ships 3
Others 3
Total 1,034
Source: Company
Allcargo provides integrated end-to-end
project, engineering and logistics
services through a diverse fleet of
special equipments.
Project and Engineering Solutions
Allcargo Logistics through its Project & Engineering Solutions division,
provides integrated end-to-end project, engineering and logistics
services through a diverse fleet of owned / rented special equipment like
hydraulic axles, cranes, barges, reach – stackers and ships to carry ODC
(Over Dimensional Consignment) / OWC (Over Weight Cargos) as well
as project engineering solutions across various sectors.
Company’s P&E division combines equipment leasing, project
movement and coastal shipping as the company focuses to provide
integrated logistics solutions to clients and at the same time also
harnessing synergies from MTO and CFS verticals. With this, the
company is planning to build niche business offering translating into
customer stickiness and higher margins.
Allcargo owns a diverse fleet of over 1,000 equipments including cranes,
hydraulic axles, trailers, reach – stackers, forklifts, prime movers,
barges and coastal vessels to serve diversified customer base
representing some of the major infrastructure sectors of the Indian
economy with long term strategic value.
Allcargo owns a diverse fleet of over
1,000 equipments catering to major
infrastructure sectors.
Add Value By Smart Investing 11 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
Forged international partnerships to
tap heaviest erection jobs across India
Company has forged international partnerships with Netherlands based
Mammoet to provide crawler lattice boom cranes from 1,000 MT up to
5,000 MT besides technical support foe erection and lift plan. Allcargo
also exclusively represents Germany’s Hansa Heavy Lift – world leader in
heavy lift business, with 21 multipurpose heavy-lift freighters.
Allcargo’s Project & Engineering Solutions divisions’ income has fallen by
10.0% CAGR over FY12 – FY14 to Rs. 446.32 crores due to sluggish
economic environment and limping infrastructure sector. Its EBIT
margins also collapsed from 20.3% in FY12 to 1.9% in FY14. However,
P&E division has witnessed some signs of revival during the first nine
months of FY15 as the income from the division has registered growth of
13.5% over the matching period last year to Rs. 375.38 crores. EBIT
margins have however, come down by 150 basis points to 11.0% during
9M FY15 from 12.5% during 9M FY14.
Allcargo has consistently increased its fleet size on the back of trust and
reliability bestowed by its customers from the thermal power, wind
power, engineering, infrastructure, cement and steel sectors.
Fleet size caters to varied
infrastructure sectors.
Add Value By Smart Investing 12 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
Indian logistics industry is expected to
reach Rs. 21.5 trillion size by FY16.
LCL Consolidation business is the
pivot of the company’s future growth
due to its vast experience.
India’s container transport comprises
of about 21% - 22% of total cargo
traffic as compared to global average
of about 70% - 75%.
Indian logistics industry is expected to witness healthy growth to touch
Rs. 21.5 trillion by FY16. The growth in the Indian logistics industry is
expected to be led mainly by volume growth in containerization,
development of new terminals at ports which will result in incremental
growth in volumes, dedicated freight corridors, Delhi – Mumbai
Industrial corridor and new business segments like 3PL and cold chain
facilities.
Allcargo is well placed to capture the growth in the logistics sector due its
presence in various segments of the industry viz. Multimodal Transport
Operations, Container Freight Stations/ Inland Container Depot, 3PL &
Warehousing and upcoming segment in the nature of coastal shipping.
LCL Consolidation is a highly fragmented market globally with industry
consolidation being witnessed in last few years. Allcargo's subsidiary,
Eculine has demonstrated strong capabilities in identifying suitable and
value accretive acquisition opportunities.
Company due to its long standing experience in the LCL Consolidation is
racing ahead and it further plans to expand its business in high growth
markets like Far East and China, selectively opening new offices to serve
additional port pairs and setting up warehouses in Antwerp, Rotterdam,
Dubai and Shanghai.
Containerization is gaining traction ever year and has risen to about 20%
in the EXIM trade from approximately 11.5% a decade ago. Container
transport constitutes about 21% - 22% of India’s cargo traffic which is
much below the global average of 70% - 75%.
Add Value By Smart Investing 13 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
Infrastructure led growth especially
in sectors like power, cement, public
transport, oil & gas, steel, etc. will
increase the demand for specialized
transport solutions.
EXIM trade is likely to witness robust growth going forward on the back of
improvement in economic growth in India as well as in other part of the
world (though at a slower pace), demographic and lifestyle changes in
India, urbanization and growth of secondary cities. Government’s thrust
on “Make in India” can provide the right lever to the EXIM trade as it
envisages making India a manufacturing hub. Allcargo is expected to
enjoy the fruits for the investments it has made in CFSs/ICDs as revival in
EXIM trade will translate into higher container traffic.
India is at the cusp of the second economic revolution which will be
demand significant investments in infrastructure sector. Huge
investments is expected in power sector which will not be restricted to only
Greenfield projects but will also extend to transmission and distribution
segments as well. Government’s increased focus on building up capacities
of green and renewable energy will also attract higher investments.
Cement capacities in India is expected to grow to 550 MT by FY20 from its
current capacity of about 370 MT. Public transport facilities like 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 are
having plans to build metro rails.
Oil & Gas sector is expected to spend about US$45 billion in India in next
few years. All these investments will drive demand for steel. Company is
expected to benefit significantly from the infrastructure led growth
especially in sectors like power, cement, public transport, oil & gas among
others as its P&E division owns a diverse fleet of over 1,000 equipments
catering to various infrastructure sectors and providing specialized
transport solutions.
Add Value By Smart Investing 14 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
Allcargo is exposed to economic risks
which can impact its various
business segments and thwart its
growth.
Revival in EXIM trade is key for the
company’s growth.
Challenges
Allcargo’s business is substantially dependent on the prevailing global
economic conditions and as witnessed in the previous years, global trade
directly impacts company’s MTO business. Slowdown in infrastructure
development, inflation, changes in tax, trade, fiscal and monetary policies,
scarcity of credit, etc. may adversely affect the India as well as global
growth which in turn could affect the company’s CFS/ICD, warehousing
and P&E solutions business.
Company can be affected by the rise and fall in the levels of imports and
exports in the country. Allcargo’s CFS/ICD business will face major
challenges as it is essentially dependent on imports and exports of
containerized cargo in India. This can also have a debilitating effect on the
company’s financial matrix due to high margin nature of the business.
Company faces different levels of competition in each of its business
segment from domestic as well as multinational companies. Allcargo also
faces liability risk arising from any damage to cargo, equipments, life and
third parties which may adversely affect the business.
Execution risk is also one of the major risk that company faces as the
project execution is largely dependent upon land purchase, project
management skills and timely delivery by equipment suppliers. Any delay
in project implementation can impact revenue and profit for that period.
Soaring land prices, a complex tax structure, infrastructure bottlenecks,
retaining talent and unprecedented natural & man-made disasters and
political and social turmoil continue to pose severe risk to the business.
Add Value By Smart Investing 15 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
Add Value By Smart Investing 16 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
FINANCIAL SUMMARY: P&L CONSOLIDATED
Y/E MARCH (`CR)
PARTICULARS 3Q FY15 2Q FY15 3Q FY14 9M FY15 9M FY14
Net Sales 1,430.52 1,461.02 1,515.55 4,210.16 3,565.83
Other Operating Income 1.14 0.77 0.82 3.86 2.80
Other Income 11.66 14.70 12.69 34.70 32.64
Total Income 1,443.32 1,476.49 1,529.06 4,248.72 3,601.27
Total Expenditure 1,299.26 1,343.99 1,405.39 3,845.76 3,274.79
PBIDT 132.40 117.80 110.98 368.26 293.84
Gain/(Loss) on Forex fluctuations - - - - -
Interest 14.03 14.14 18.79 44.57 40.07
PBDT 130.03 118.36 104.88 358.39 286.41
Depreciation 37.22 39.05 33.24 118.98 99.49
PBT before exceptional items 92.81 79.31 71.64 239.41 186.92
Exceptional (income)/expense - - - - -
PBT 92.81 79.31 71.64 239.41 186.92
Tax 16.64 12.90 7.38 47.11 29.24
Deferred Tax 2.01 0.30 6.69 0.64 14.65
Reported Profit After Tax 74.16 66.11 57.57 191.66 143.03
Minority Interest After NP - - - - -
Profit/Loss of Associate Company (2.38) (2.48) (0.55) (7.25) (5.22)
Net Profit after Minority Interest & P/L Asso.Co. 71.78 63.63 57.02 184.41 137.81
Extra-ordinary Items - - - - -
Adjusted Profit After Extra-ordinary item 71.78 63.63 57.02 184.41 137.81
EQUITY 25.21 25.21 25.21 25.21 25.21
EPS Before Minority Interest 5.88 5.24 4.57 15.21 11.35
EPS After Minority Interest 5.69 5.05 4.52 14.63 10.93
Source: Company, Our Research
Add Value By Smart Investing 17 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
FINANCIAL SUMMARY P&L CONSOLIDATED
Y/E MARCH (`CR) PARTICULARS FY13 FY14 FY 15E FY16E
Net Sales 3,926.27 4,859.43 5,588.34 6,426.60
Other Operating Income - - - -
Other Income 66.18 36.50 46.00 60.00
Total Income 3,992.45 4,895.93 5,634.34 6,486.60
Total Expenditure 3,566.26 4,463.50 5,110.54 5,886.76
PBIDT 360.01 395.93 477.80 539.83
Gain/(Loss) on Forex fluctuations - - - -
Interest 45.30 60.94 55.88 64.27
PBDT 380.89 371.49 467.92 535.57
Depreciation 147.35 175.46 153.68 176.73
PBT before exceptional items 233.54 196.03 314.24 358.84
Exceptional (income)/expense - - - -
PBT 233.54 196.03 314.24 358.84
Tax 31.97 27.65 67.56 77.15
Deferred Tax 19.24 13.94 - -
Reported Profit After Tax 182.33 154.44 246.68 281.69
Minority Interest After NP 12.94 5.11 9.37 10.70
Profit/Loss of Associate Company 0.35 - - -
Net Profit after Minority Interest & P/L Asso.Co. 169.04 149.33 237.31 270.98
Extra-ordinary Items 7.57 5.42 - -
Adjusted Profit After Extra-ordinary item 161.47 143.91 237.31 270.98
EQUITY 25.21 25.21 25.21 25.21
EPS Before Minority Interest 14.47 12.25 19.57 22.35
EPS After Minority Interest 13.41 11.85 18.83 21.50
Valuation Ratios EBITDA MARGINS (%) 9.2% 8.1% 8.6% 8.4%
EV/EBITDA 4.84 6.34 9.07 8.03
DEBT/EQUITY 0.47 0.50 0.45 0.40
DIVIDEND PAYOUT RATIO (%) 3.7% 12.7% 18.6% 18.6%
MKT CAP/ SALES 0.38 0.39 0.70 0.61
Source: Company, Our Research
Add Value By Smart Investing 18 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
BALANCE SHEET CONSOLIDATED Y/E MARCH (`CR)
PARTICULARS As at 30/9/14 As at 31/3/14 Equity and Liabilities: SHAREHOLDER'S FUNDS Share Capital 25.24 25.24 Reserves & Surplus 1,828.20 1,767.88
1,853.44 1,793.12
MINORITY INTEREST 35.14 46.33 NON-CURRENT LIABILITIES Long Term Borrowings 457.07 520.75 Deferred Tax Liabilities (Net) 101.73 104.53 Other Long Term Liabilities 22.83 33.79 Long Term Provisions 36.22 32.65
617.85 691.72
CURRENT LIABILITIES Short Term Borrowings 126.45 91.98 Trade Payables 536.11 466.81 Other Current Liabilities 356.43 512.36 Short Term Provisions 22.06 27.52
1,041.05 1,098.67
TOTAL 3,547.48 3,629.84
ASSETS NON-CURRENT ASSETS Fixed Assets 1,315.49 1,385.19 Goodwill on consolidation 849.14 870.99 Non - current Investments 56.43 55.56 Deferred Tax Assets (Net) - - Long Term Loans and Advances 296.38 253.92 Other Non - current Assets 2.55 2.94
2,519.99 2,568.60
CURRENT ASSETS Current Investments 52.15 134.68 Inventories 11.27 11.41 Trade Receivables 617.24 571.50 Cash and Bank Balances 156.44 164.69 Short Term Loans and Advances 131.62 132.22 Other Current Assets 58.77 46.74
1,027.49 1,061.24
TOTAL 3,547.48 3,629.84
Source: Company
Add Value By Smart Investing 19 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
Present in multiple channels of
logistics industry.
Leadership position in LCL
Consolidation, revival in EXIM trade
and pick up in infrastructure sector
will augur well for the company.
Initial signs of improvement in
business, visible during the first nine
months of FY 15 with sales and
profits rising 18.1% and 33.8%
respectively over the corresponding
period of last year.
Emerging areas like 3PL &
Warehousing and coastal shipping to
accentuate the growth in future.
Investment Rationale
Allcargo Logistics by diversifying its presence across multiple logistics
channels like ocean and air freight forwarding, container freight stations,
inland container depots, project cargo, equipment rentals, 3PL and coastal
shipping has placed itself in one of the best position to capture the high
growth as India’s long term growth prospects remain bright due to the
possession of strengths viz. demographic transition, urbanization & growth
of secondary cities, change in lifestyle patterns, etc.
Company through string of acquisitions has become one of the largest LCL
Consolidators in the world and is all set to take advantage of its dominant
position from the expected revival in EXIM trade. Allcargo’s CFS/ICD
business will also benefit as revival in EXIM trade will translate into
higher demand for containerization resulting in growth of container traffic
and pick up in infrastructure spending will bode well for its Project
Engineering & Solutions vertical.
New areas like 3PL (third party logistics) & warehousing under which it
offers value added services like packaging, labeling, segregation, etc. as per
customer requirements and coastal shipping wherein it offers a variety of
services in bulk, break-bulk and project cargo shipping across ports in
India and the sub-continent will add up to the company’s growth going
forward.
Allcargo’s operating income has grown at a CAGR of 14.1% during FY10 –
FY14 helped by acquisitions while its Profits are down by 2.6% during the
period due to slump in global economies and higher interest burden for the
debt raised to fund the acquisitions. EBITDA margins have also remained
subdued for the reasons mentioned above.
Add Value By Smart Investing 20 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
Peer Comparison - Financial Ratios
PARTICULARS Year M-Cap/Sales EV/EBITDA Debt/EquityEBITDA
Margins
Interest
CoverageEPS Cash EPS P/E
Allcargo Logistics Ltd. FY 13 0.38 4.84 0.47 10.85 6.16 13.21 25.9 8.74
FY 14 0.39 6.34 0.5 8.9 4.22 11.59 25.92 13.09
Transport Corporation of India Ltd. FY 13 0.19 3.89 0.88 8.57 3.87 9.29 15.66 5.95
FY 14 0.36 6.16 0.77 8.03 4.04 9.51 15.94 11.66
Container Corporation Ltd. FY 13 3.01 7.59 0.01 31.1 373.35 45.79 82.25 15
FY 14 3.72 11.25 0 28.35 1054.45 46.63 56.62 20.89
Gateway Distriparks Ltd. FY 13 1.42 5.79 0.17 27.45 10.28 10.54 17.84 11.86
FY 14 1.79 7.34 0.25 27.23 6.65 11.32 19.75 14.77
Gati Ltd. FY 13 0.18 7.16 0.76 7.72 1.68 0.81 4.55 32.16
FY 14 0.63 12.21 0.62 8.48 2.24 3.06 5.39 26.47
Blue Dart Ltd. FY 13 2.56 17.25 0 14.22 27410 55.44 82.83 42.32
FY 14 4.54 41.07 0 10.93 6151 42.8 53.62 86.71
Source: Company, Capital Line, Our Research
Allcargo Logistics is attractively
valued.
However, for the first nine months of the current fiscal initial signs of
improvement in the financials are visible with sales and net profits rising
18.1% and 33.8% respectively over the corresponding period of last year
while EBITDA margins have also inched up to 8.7% from 8.2% registered
in 9M FY14.
Allcargo enjoys good credit rating which is evident from the fact that the
credit rating agency, CRISIL has assigned a rating of CRISIL AA-/Stable
for its long term debt and CRISIL A1+ (highest) for its short term debt.
Considering all the above factors we recommend buying Allcargo Logistics
at current market price of Rs. 320 which translates into price-to-equity
ratio of 14.88x its consolidated FY16 (E) earnings per share of Rs. 21.5 and
EV/EBITDA of 8.03 for a target of Rs. 400.0 from a long term perspective.
Add Value By Smart Investing 21 | P a g e
Allcargo Logistics Ltd.
Initiating Coverage ▐ Sector: Transport & Logistics
Date: 25/03/2015
Wellworth Wealth Management LLP
502, Akruti Orion 5th Floor, Shraddhanand Road, Vileparle East, Mumbai-400057,
Tel: 022-67159008/67159097 Fax: 022-67159090
Email: [email protected]
FOR PRIVATE CIRCULATION ONLY
DISCLAIMER: Wellworth Wealth Management LLP and its affiliates are a full-service, brokerage&
investment management group. We along with our affiliates are participants in virtually all securities
trading markets in India. Our research professionals provide important input into our investment
banking and other business selection processes. Investors may assume that Wellworth Wealth
Management LLP and/or its affiliates may seek investment banking or other business from the company
or companies that are the subject of this material and that the research professionals who were involved
in preparing this material may participate in the solicitation of such business. Our salespeople, traders,
and other professionals may provide oral or written market commentary or trading strategies to our
clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary
trading and investing businesses may make investment decisions that are inconsistent with the
recommendations expressed herein. In reviewing these materials, you should be aware that any or all of
the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally,
other important information regarding our relationships with the company or companies that are the
subject of this material is provided herein. This report is not directed to, or intended for distribution to or
use by, any person or entity who is a citizen or resident of or located in any locality, state, country or
other jurisdiction where such distribution, publication, availability or use would be contrary to law or
regulation or which would subject
All material presented in this report, unless specifically indicated otherwise, is under copyright to
Wellworth Wealth Management LLP. None of the material, nor its content, nor any copy of it, may be
altered in any way, transmitted to, copied or distributed to any other party, without the prior express
written permission of Wellworth Wealth Management LLP . All trademarks, service marks and logos
used in this report are trademarks or registered trademarks of Wellworth Wealth Management LLP or
its Group Companies. The information contained herein is not intended for publication or distribution or
circulation in any manner whatsoever and any unauthorized reading, dissemination, distribution or
copying of this communication is prohibited unless otherwise expressly authorized. Please ensure that
you have read “Risk Disclosure Document for Capital Market and Derivatives Segments” as prescribed
by Securities and Exchange Board of India before investing in Indian Securities Market. In so far as this
report includes current or historic information, it is believed to be reliable, although its accuracy and
completeness cannot be guaranteed.