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http://www.kotaksecurities.com/pdf/dmb/MorningInsight14032012.pdf
ALLCARGO GLOBAL LOGISTICS LTD
PRICE: RS.140 RECOMMENDATION: BUY
TARGET PRICE: RS.190 CY12E P/E: 7.4X
To form a new company for its Non Vessel Owning Container Carrier (NVOCC) business. It is also looking forward to add capacities
in all areas.
Despite sluggish growth in World Trade and poor container shipping
market, Allcargo has been performing strongly, both in the NVOCC segment
and the Container Freight Station (CFS) business. It is now in the process of
forming a new company for its Non Vessel Owning Container Carrier
(NVOCC) business. The company has announced the merger of the project
division of its fully owned subsidiary into itself and has also constituted a
Committee of Directors to look into the demerger of its global Less than
Container Load (LCL) business. On expansion front, it is increasing the CFS
capacity at JNPT through a new facility with an annual capacity of ~1.5 lakh
TEUs. Company would also enhance the capacity at its Chennai CFS from 1.2
lakh TEUs to 1.5 lakh TEUS through renovation of the facility and purchase
of gantry cranes. Management indicated that the NVOCC and the CFS
segment would continue to grow at 10 to 12% CAGR despite bad times as
the company primarily operates in LCL segment which is more immune to
sluggishness in container trade. In the project cargo and engineering
solution division, the company has made a relatively huge capex of Rs 3.25
bn in CY11 primarily to enhance the fleet. We expect this segment to report
revenue growth of 25% CAGR to Rs 4.8 bn in CY12E. Overall we expect the
company to report a healthy topline growth of 12% CAGR to ~Rs 36 bn in
CY12E. The margins are also expected to expand as Allcargo takes an
absolute margin in its NVOCC segment and the current slowness in the
container shipping market has made the base low. Increased contribution
from high margin CFS business in total revenues would also help the
margin. Despite strong operational performance and estimated as well, the
stock price has remained flat YoY. We reiterate BUY on Allcargo with an
unchanged 12 month price target of Rs 190 for the stock. Downside to our
call includes: 1) Further competition in the CFS segment. 2) Slowing down
of container trade
Highlights of the meet
Intention of the restructuring
Allcargo wants to have a global LCL business as a separate entity which would
home ECULine and the domestic Multimodal Transport Operations (MTO) business.
While Allcargo India would home businesses like CFS, ICD and Project Engineering.
This we believe would help the company monitor the performance of each of the
businesses effectively. We also believe this would give investors an opportunity to
properly allocate their investment as there is a very clear distinction between the
global NVOCC business and the pure domestic business which is more dependent on
India's Exim growth.
We estimate the restructuring to happen in six to nine months from today. Post that,
the NVOCC business would be a separate listed entity with an estimated market cap
of Rs 14 bn (based on CY12 Sales of Rs 280 bn and 4% PAT margin and multiple of
12)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/dmb/MorningInsight14032012.pdf
ALLCARGO GLOBAL LOGISTICS LTD
PRICE: RS.140 RECOMMENDATION: BUY
TARGET PRICE: RS.190 CY12E P/E: 7.4X
To form a new company for its Non Vessel Owning Container Carrier (NVOCC) business. It is also looking forward to add capacities
in all areas.
Despite sluggish growth in World Trade and poor container shipping
market, Allcargo has been performing strongly, both in the NVOCC segment
and the Container Freight Station (CFS) business. It is now in the process of
forming a new company for its Non Vessel Owning Container Carrier
(NVOCC) business. The company has announced the merger of the project
division of its fully owned subsidiary into itself and has also constituted a
Committee of Directors to look into the demerger of its global Less than
Container Load (LCL) business. On expansion front, it is increasing the CFS
capacity at JNPT through a new facility with an annual capacity of ~1.5 lakh
TEUs. Company would also enhance the capacity at its Chennai CFS from 1.2
lakh TEUs to 1.5 lakh TEUS through renovation of the facility and purchase
of gantry cranes. Management indicated that the NVOCC and the CFS
segment would continue to grow at 10 to 12% CAGR despite bad times as
the company primarily operates in LCL segment which is more immune to
sluggishness in container trade. In the project cargo and engineering
solution division, the company has made a relatively huge capex of Rs 3.25
bn in CY11 primarily to enhance the fleet. We expect this segment to report
revenue growth of 25% CAGR to Rs 4.8 bn in CY12E. Overall we expect the
company to report a healthy topline growth of 12% CAGR to ~Rs 36 bn in
CY12E. The margins are also expected to expand as Allcargo takes an
absolute margin in its NVOCC segment and the current slowness in the
container shipping market has made the base low. Increased contribution
from high margin CFS business in total revenues would also help the
margin. Despite strong operational performance and estimated as well, the
stock price has remained flat YoY. We reiterate BUY on Allcargo with an
unchanged 12 month price target of Rs 190 for the stock. Downside to our
call includes: 1) Further competition in the CFS segment. 2) Slowing down
of container trade
Highlights of the meet
Intention of the restructuring
Allcargo wants to have a global LCL business as a separate entity which would
home ECULine and the domestic Multimodal Transport Operations (MTO) business.
While Allcargo India would home businesses like CFS, ICD and Project Engineering.
This we believe would help the company monitor the performance of each of the
businesses effectively. We also believe this would give investors an opportunity to
properly allocate their investment as there is a very clear distinction between the
global NVOCC business and the pure domestic business which is more dependent on
India's Exim growth.
We estimate the restructuring to happen in six to nine months from today. Post that,
the NVOCC business would be a separate listed entity with an estimated market cap
of Rs 14 bn (based on CY12 Sales of Rs 280 bn and 4% PAT margin and multiple of
12)
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