ALLCARGO GLOBAL LOGISTICS: buy says Kotak Sec

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q Good growth expected in ECULINE business on the back of growth in
global economy
q Acquired Honk Kong based NVOCC Company - EBIDTA positive
q CFS business doing well - looking to expand at JNPT
q Merged project and engineering solutions business - Rs.2.0 bn order
book
q Looking to spend Rs.2.5 bn in CY11E for expansion and acquisition
q Introduce FY11 earning estimates with EPS estimate of Rs.15.6
q Due to 42% upside potential we continue to recommend BUY on
ALLCARGO with revised price target to Rs.225 (Rs.210 earlier)



ECULINE business expected to pick up with expected growth in
the global economy
ECULINE business which contributes ~70% of the top line of the company is expected
to pick up going forward primarily due to expected growth in the world
economy. Also it has been successful in shifting some of the back end activities to
low cost destination like India. Thus it has been successful in cost cutting and increasing
the efficiency and profitability of the ECULINE business. Going forward as
the business picks up it should result into increased profitability. Here the strategy of
the company is to acquire companies in regions where its presence is not significant.
It is also looking to buy out the local partners and increase its stake in various countries.

Acquired Honk Kong based NVOCC Company
n In October 2010, ALLCARGO has acquired business rights and controlling stake in
Hong Kong based companies engaged in NVOCC business in China and other
parts of eastern regions. It paid purchase consideration of 6.2x its CY09 EBIDTA.
n We believe this is positive as the company operates out of China where now
ALLCARGO has substantial presence. With this it can integrate its China operations
with the global ECULINE business and this is expected to lead to efficiency
in its global operations.
n The acquisition would further strengthen its profits as the acquired company reported
revenues of $45 mn and was EBIDTA positive in CY09. In CY10 we expect
its share of revenues to be $35 mn with $3.6 mn EBIDTA.
n We feel that the above development is positive as it would further strengthen its
position in the global NVOCC business.

CFS business doing well - looking to expand at JNPT
The company is currently operating three CFS at JNPT, Chennai and Mundra. All of
them are efficiently operated and have proved themselves as the quality service provider.
ALLCARGO is leveraging its relationships with freight forwarders and major
shipping lines to grow volumes at its CFS. It is looking to add the capacity at JNPT
either through organic or inorganic route. It has already undertaken expansions at
Chennai to 1.2 lakh TEU and Mundra to 77000 TEU. It has commenced operation at
Pitahmpur ICD and going forward it is looking to set up a pan India ICD network
through locations like Hyderabd, Dadri, Nagpur and Bengaluru.