1. 1QCY2010 Result Update I Logistics
May 5, 2010
Allcargo Global Logistics NEUTRAL
CMP Rs186
Performance Highlights Target Price -
Allcargo Global Logistics’ (AGL) consolidated 1QCY2010 results were above Investment Period -
our expectations, on account of a strong pick-up in volumes across segments,
with improving Exim visibility. The ECU line continued to remain subdued, on Stock Info
account of inability to pass on the entire rise in freight rates, which resulted in
Sector Logistics
an OPM erosion of 269bp yoy in the ECU line. The management has
indicated a gradual pass of freight rate rise in the ensuing quarters, which Market Cap (Rs cr) 2,325
should boost margins. The consolidated bottom-line was boosted by lower
Beta 0.4
interest expenses and a lower tax rate, which resulted in a 23.2% yoy jump in
the net profit. AGL’s balance sheet is well-capitalised, with zero net debt. We 52 WK High / Low 218/145
maintain a Neutral view on stock.
Avg. Daily Volume 22,256
Pick-up in volumes and lower interest expenses drive profitability: AGL
Face Value (Rs) 2
reported a 21.9% yoy jump in revenues to Rs586cr, due to a strong pick-up in
volumes across segments. The Indian MTO and CFS business grew by BSE Sensex 17,088
~27.8% yoy to Rs104cr and Rs45cr, respectively, on account of strong
Nifty 5,125
volumes, with improving Exim visibility. The ECU line reported a 12.3% yoy
jump in revenues to Rs406cr. The equipment leasing business witnessed a Reuters Code ALGL.BO
revenue growth of 23.9% yoy to Rs20cr, on account of a higher utilisation of
cranes. The Project cargo segment also witnessed a strong revenue growth of Bloomberg Code AGLL@IN
36.0% to Rs41cr, on account of a strong order book. However, the Shareholding Pattern (%)
consolidated operating profit grew by a mere 2.7% yoy to Rs57cr, on account
of inability to pass on the entire hike in freight rates. Consequently, the OPM Promoters 73.0
fell by 182bp yoy to 9.8%. The interest costs fell by 32.6% yoy to Rs3.5cr, as MF/Banks/Indian FIs 1.8
the company utilised its surplus cash to repay Rs100cr of debt. Further, AGL
continued to claim MAT entitlement, which resulted in a lower tax rate of FII/NRIs/OCBs 23.1
17.4% for 1QCY2010 (as against 26.2% in 1QCY2009). Consequently, the
Indian Public 2.1
PAT surged by 23.2% yoy to Rs34cr in 1QCY2010.
Abs. (%) 3m 1yr 3yr
Outlook and Valuation: We believe that AGL is well positioned in the
Container Segment, through its MTO and CFS Segments. We believe that the Sensex 8.2 40.9 22.6
stock’s performance will depend on an improvement in the Operational
efficiency of the ECU Line. At the CMP of Rs186, the stock is trading at 13.0x Allcargo (1.8) 21.0 (10.7)
CY2011E EPS of Rs14.3 and at 7.3x CY2011E EV/EBIDTA. We believe that
the current valuations factor in the company’s near-term growth opportunities;
hence, we maintain a Neutral view on the stock.
Key Financials (Consolidated)
Y/E Dec (Rs cr) CY2008 CY2009 CY2010E CY2011E
Net Sales 2,314 2,061 2,352 2,686
% chg 43.4 (10.9) 14.1 14.2
Net Profit 107.7 129.9 151.9 186.4
% chg 49.4 20.7 16.9 22.7
EBITDA Margin (%) 9.5 10.6 10.9 12.2
FDEPS (Rs) 8.2 9.9 11.6 14.3
Param Desai
P/E (x) 22.6 18.7 16.0 13.0
Tel: 022 – 4040 3800 Ext: 310
P/BV (x) 4.0 2.5 2.0 1.7
E-mail: paramv.desai@angeltrade.com
RoE (%) 23.1 18.0 14.9 15.3
RoCE (%) 22.3 15.2 14.2 16.5
Mihir Salot
EV/Sales (x) 1.2 1.2 1.0 0.9 Tel: 022 – 4040 3800 Ext: 307
EV/EBITDA (x) 12.1 11.6 9.5 7.3 E-mail: mihirr.salot@angeltrade.com
Source: Company, Angel Research
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539
2. Allcargo l 1QCY2010 Result Update
Exhibit 1: 1QCY2010 Performance (Consolidated)
(Rs cr) 1QCY2009 4QCY2009 1QCY2010 %yoy %qoq
Net Sales 481 544 586 21.9 7.8
Total expenditure 425 492 529 24.4 7.4
Operating Profit 56 52 57 2.7 10.9
OPM (%) 11.6 9.5 9.8 (182bp) 28bp
Depreciation 12 15 15 28.5 3.2
Interest 5 7 4 (32.6) ( 46.9)
Other income 4 4 4 3.3 10.1
Profit Before Tax 43 34 43 0.0 25.5
Tax 11 3 7 (33.5) 160.8
Tax rate (%) 26.2 8.4 17.4 (861bp) 905bp
Minority
(4) (3) (1) (67.7) (55.5)
Interest/EO Items
Reported PAT 27.6 28.4 34.0 23.2 19.9
PAT margin (%) 5.7 5.2 6.2 6bp 59bp
EPS (Rs) 2.2 2.3 2.9 23.2 19.9
Source: Company, Angel Research
Pick-up in volumes; on low base
CFS volumes grew by 38.5% yoy (up 14.8% qoq), led by a strong performance
across the CFS segment, owing to a low base and improving Exim visibility.
However, the EBIT margins in CFS fell by 274bp yoy, owing to a reduction in the
dwell time at JNPT from 11 days to 9 days, as importers were reluctant to take
delivery of goods in 1QCY2010. Standalone MTO Volumes grew by 19.1% yoy (up
3.8% yoy) to 6,978 TEU. ECU Line Volumes also grew by 20.7% yoy (up 2.5% down
yoy) to 51,265 TEU. However, the OPM in the ECU Line fell by 269bp yoy, on
account of inability to pass on the entire rise in freight rates, which the management
has indicated to reverse, as it will gradually pass on hikes in the ensuing quarters.
Exhibit 2: Volumes Break-Up
(TEUs) 1QCY09 4QCY09 1QCY10 %yoy %qoq
Volumes 88,263 104,872 113,521 28.6 8.2
CFS 39,915 48,156 55,278 38.5 14.8
Standalone MTO 5,861 6,720 6,978 19.1 3.8
ECU Line 42,487 49,996 51,265 20.7 2.5
SSource: Company, Angel Research
May 5, 2010 2
3. Allcargo l 1QCY2010 Result Update
Exhibit 3: Segment-wise Performance (Standalone)
Revenue (Rs cr) 1QCY2009 4QCY2009 1QCY2010 %yoy %qoq
Total 128 139 164 28.1 18.4
MTO 81 82 104 27.8 26.0
CFS 35 43 45 27.9 3.4
TFSPL 16 17 20 23.9 13.4
Less Inter-segment (4) (4) (4) 3.4 (6.8)
EBIT (Rs cr)
Total 34 33 38 14.2 15.0
MTO 10 7 13 26.5 70.9
CFS 18 22 21 21.0 (3.0)
TFSPL 6 4 4 (26.8) 9.8
EBIT Margins (%)
Total 26.3 24.2 23.5 (286bp) (71bp)
MTO 12.4 9.1 12.3 (13bp) 323bp
CFS 50.6 51.0 47.8 (274bp) (318bp)
TFSPL 37.2 22.7 22.0 (1,524bp) (73bp
Source: Company, Angel Research
Raises Rs105cr through QIP
During the quarter, AGL issued 0.57cr fresh shares at Rs184.8, resulting in a
dilution of 4.5%. The funds will be utilised for inorganic acquisitions in the MTO
segment. AGL has also indicated capex of Rs220cr in CY2010, for the ongoing
expansion of the ICD segment across India and for purchasing cranes for its
equipment leasing business. We believe that AGL’s balance sheet is well capitalised,
with zero net debt, to fund capex.
Outlook and Valuation
We believe that AGL is well positioned in the Container Segment, through its MTO
and CFS Segments. Moreover, with the ECU Line acquisition, AGL has the
opportunity to scale-up its operations globally as well as enhance its Profits. We
believe that the stock’s performance will depend on an improvement in the
Operational efficiency of the ECU Line. At the CMP of Rs186, the stock is trading at
13.0x CY2011E EPS of Rs14.3 and at 7.3x CY2011E EV/EBIDTA. We believe that the
current valuations factor in the company’s near-term growth opportunities; hence,
we maintain a Neutral view on the stock.
May 5, 2010 3
7. Allcargo l 1QCY2010 Result Update
Research Team Tel: 022-4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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Disclosure of Interest Statement Allcargo
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May 5, 2010 7
