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ALLCARGO GLOBAL LOGISTICS LTD (AGLL)
PRICE: RS.140 RECOMMENDATION: BUY
TARGET PRICE: RS.190 FY13E P/E: 8.7X
Healthy operational performance, margins at multiyear high
q Allcargo Logistics (AGLL) reported a consolidated adjusted PAT of Rs 609
mn vs. our estimate of Rs 660 mn and consensus estimate of Rs 626 mn
in 3Q CY11, up 30% YoY, driven by a 600 bps YoY margin improvement
in the CFS segment
q EBITDA margin was at a multi-year high of 12.9%, up 180 bps YoY and 90
bps QoQ, driven by strong operational performance of both the MTO and
CFS business
q Revenue was at Rs 8.1 bn (up 15% YoY), below our estimate of Rs 8.8 bn
and even consensus estimate of Rs 8.7 bn on account of a sequential
decline in both CFS and MTO volumes.
q We reiterate BUY with a PT of Rs 190 based on 11x CY12E earnings.
Other financial highlights
n The ratio of Imports to Exports containers handled in the CFS segment also improved
QoQ from 5.11 to 5.19, which also contributed for the margin improvement
in the segment
n Overall volumes in the CFS segment grew 14% YoY and declined 1% QoQ to
62,705 TEUs. While realization was up 26% YoY and down 2% QoQ
n In the MTO segment, volumes were up 12% YoY and flat QoQ at 70,377 TEUS
n Ebidta margin for ECULine stood at 6.4 % while Ebidta margin in the domestic
MTO business stood at 7.2%
n Interest cost for the company has gone in the quarter to Rs 125 mn from Rs 50
mn YoY as the company has been doing capex across segments primarily
through debt.
n The tax rate stood at a higher 17% (previous quarter it was 14%) due to lower
MAT entitlement for the quarter. Also the earnings contribution from the CFS
segment has increased which is a full tax paying business.
n The company has declared an interim dividend of Rs 1 during the quarter with
November 18th as the record date
Volumes at Mundra CFS have grown at a healthy rate in the current quarter growing
133% YoY and 33% QoQ to 9,809 TEUs. While volumes at Chennai have grown
(despite competition) by 3% QoQ and 14% YoY. Volumes at Mumbai JNPT CFS
were disappointing as they have declined both QoQ and YoY primarily due to intense
competition. The realizations at JNPT and Mundra have increased significantly
and currently stand at very high levels which we believe is not sustainable in the
long run. Management indicated that the higher realisation was primarily due to
higher dwell time. The ratio of Imports to Exports containers handled at all the CFS
currently stands at a high of 5.19, which also contributed to the improvement of
realisation.
Strong volumes were reported by the MTO operations growing 13% YoY and 6%
QoQ. Healthy volumes were reported even by ECULine growing 12% YoY and remaining
flat QoQ. Despite concerns in Europe and poor container shipping market,
performance of ECULine and the domestic MTO business has been healthy.
Further capex of about Rs 2 bn over CY11 - CY12E
The company has already spent about Rs 8 bn in the last 20 months in creating
capacity in CFS business, adding ICD’s, overseas acquisitions and adding equipment
in the project and engineering solutions division. Now we expect the company to
spend about Rs 2 bn further in rest of CY11 and CY12E as capex. We expect the
company to start generating free cash flow from CY12E onwards
Outlook and Valuation
We expect the MTO realizations to come under pressure due to the weakness in the
container shipping segment and concerns in Europe and US. However, we maintain
volume growth estimates at 14% for CY11E and 14% CY12E and 5% each in CY11
& CY12 for domestic MTO business.
The CFS segment has shown a 26% YoY growth in realization which we expect to
stabilize at current levels. With congestion at the JNPT port, slow growth in port volumes
and intense competition in the CFS business (at JNPT and Chennai), we expect
the volumes to grow at 3 to 20% across the various CFSs and realization to
stabilize at current levels for AGLL.
At CMP, the stock is trading at 8.7 x to CY12 earnings estimates and available at
~20% discount to its peer group average of 11 x for the last 3 years. We have valued
the stock at par with peers. We arrive at a new target price of Rs 190 per share
(earlier Rs.195) based on CY12E multiple. The target price implies a potential upside
of 36% for an investment horizon of 12 months
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ALLCARGO GLOBAL LOGISTICS LTD (AGLL)
PRICE: RS.140 RECOMMENDATION: BUY
TARGET PRICE: RS.190 FY13E P/E: 8.7X
Healthy operational performance, margins at multiyear high
q Allcargo Logistics (AGLL) reported a consolidated adjusted PAT of Rs 609
mn vs. our estimate of Rs 660 mn and consensus estimate of Rs 626 mn
in 3Q CY11, up 30% YoY, driven by a 600 bps YoY margin improvement
in the CFS segment
q EBITDA margin was at a multi-year high of 12.9%, up 180 bps YoY and 90
bps QoQ, driven by strong operational performance of both the MTO and
CFS business
q Revenue was at Rs 8.1 bn (up 15% YoY), below our estimate of Rs 8.8 bn
and even consensus estimate of Rs 8.7 bn on account of a sequential
decline in both CFS and MTO volumes.
q We reiterate BUY with a PT of Rs 190 based on 11x CY12E earnings.
Other financial highlights
n The ratio of Imports to Exports containers handled in the CFS segment also improved
QoQ from 5.11 to 5.19, which also contributed for the margin improvement
in the segment
n Overall volumes in the CFS segment grew 14% YoY and declined 1% QoQ to
62,705 TEUs. While realization was up 26% YoY and down 2% QoQ
n In the MTO segment, volumes were up 12% YoY and flat QoQ at 70,377 TEUS
n Ebidta margin for ECULine stood at 6.4 % while Ebidta margin in the domestic
MTO business stood at 7.2%
n Interest cost for the company has gone in the quarter to Rs 125 mn from Rs 50
mn YoY as the company has been doing capex across segments primarily
through debt.
n The tax rate stood at a higher 17% (previous quarter it was 14%) due to lower
MAT entitlement for the quarter. Also the earnings contribution from the CFS
segment has increased which is a full tax paying business.
n The company has declared an interim dividend of Rs 1 during the quarter with
November 18th as the record date
Volumes at Mundra CFS have grown at a healthy rate in the current quarter growing
133% YoY and 33% QoQ to 9,809 TEUs. While volumes at Chennai have grown
(despite competition) by 3% QoQ and 14% YoY. Volumes at Mumbai JNPT CFS
were disappointing as they have declined both QoQ and YoY primarily due to intense
competition. The realizations at JNPT and Mundra have increased significantly
and currently stand at very high levels which we believe is not sustainable in the
long run. Management indicated that the higher realisation was primarily due to
higher dwell time. The ratio of Imports to Exports containers handled at all the CFS
currently stands at a high of 5.19, which also contributed to the improvement of
realisation.
Strong volumes were reported by the MTO operations growing 13% YoY and 6%
QoQ. Healthy volumes were reported even by ECULine growing 12% YoY and remaining
flat QoQ. Despite concerns in Europe and poor container shipping market,
performance of ECULine and the domestic MTO business has been healthy.
Further capex of about Rs 2 bn over CY11 - CY12E
The company has already spent about Rs 8 bn in the last 20 months in creating
capacity in CFS business, adding ICD’s, overseas acquisitions and adding equipment
in the project and engineering solutions division. Now we expect the company to
spend about Rs 2 bn further in rest of CY11 and CY12E as capex. We expect the
company to start generating free cash flow from CY12E onwards
Outlook and Valuation
We expect the MTO realizations to come under pressure due to the weakness in the
container shipping segment and concerns in Europe and US. However, we maintain
volume growth estimates at 14% for CY11E and 14% CY12E and 5% each in CY11
& CY12 for domestic MTO business.
The CFS segment has shown a 26% YoY growth in realization which we expect to
stabilize at current levels. With congestion at the JNPT port, slow growth in port volumes
and intense competition in the CFS business (at JNPT and Chennai), we expect
the volumes to grow at 3 to 20% across the various CFSs and realization to
stabilize at current levels for AGLL.
At CMP, the stock is trading at 8.7 x to CY12 earnings estimates and available at
~20% discount to its peer group average of 11 x for the last 3 years. We have valued
the stock at par with peers. We arrive at a new target price of Rs 190 per share
(earlier Rs.195) based on CY12E multiple. The target price implies a potential upside
of 36% for an investment horizon of 12 months
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