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Allcargo Logistics: A strong quarter - Views on News from Equitymaster

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Allcargo Logistics: A strong quarter
Mar 25, 2014

Allcargo Logistics Ltd has announced results for the third quarter of financial year 2013-14 (3QFY14). The topline for the quarter registered a growth of 55.9% YoY while the net profits were up by 58.0%. Here is our analysis of the results.

Performance summary
  • Net sales for the quarter registered a growth of 55.9% YoY. For the nine months (9MFY14), the revenues registered a growth of 20.5% YoY.
  • The operating profit (EBIDTA) for the quarter grew by 46.6% YoY with EBITDA margins at 7.3% (versus 7.8% in corresponding quarter last year). For 9MFY14, the operating profits declined marginally by 0.5% YoY with margins at 8.2% as compared to 10.0% in the corresponding period last year.
  • The net profits for the quarter witnessed a growth of around 58.0% YoY with net profit margins at 3.8% versus 3.7% in the corresponding quarter last year. For 9MFY14, the net profits declined by 9.9% YoY with margins at 3.9% versus 5.2% in the corresponding period last year.

Consolidated financial summary
(Rs m) 3QFY13 3QFY14 Change 9MFY13 9MFY14 Change
Sales 9,727 15,164 55.9% 29,616 35,687 20.5%
Expenditure 8,970 14,054 56.7% 26,663 32,750 22.8%
Operating profit (EBDITA) 757 1,110 46.6% 2,953 2,937 -0.5%
EBDITA margin (%) 7.8% 7.3%   10.0% 8.2%  
Other income 55 127 130.3% 459.3 326.7 -28.9%
Interest (net) 166 188 13.1% 348 399 14.9%
Depreciation 375 332 -11.3% 1115 995 -10.7%
Profit before tax (before excep. Items) 272 717 163.9% 1,950 1,869 -4.1%
Pretax margin (%) (before excep. Items) 2.8% 4.7%   6.6% 5.2%  
Exceptional items 0 0   0 0  
Pretax profit 272 717 163.9% 1,950 1,869 -4.1%
Pretax profit margins (%) 2.8% 4.7%   6.6% 5.2%  
Tax -101 141 -238.8% 313 439 40.2%
Profit after tax/(loss) 373 576 54.4% 1,637 1,430 -12.6%
Net profit margin 3.8% 3.8%   5.5% 4.0%  
Minority interest 12 6 -53.7% 108 52 -51.6%
Share of associates 0 0   0 0  
Net profit post minority 361 570 58.0% 1,529 1,378 -9.9%
Net profit margin for the group 3.7% 3.8%   5.2% 3.9%  
No. of shares (m)         126  
Diluted earnings per share (Rs)*         12.2  
Price to earnings ratio (x)**         12.3  
*On a trailing 12 months basis

What has driven performance in 3QFY14?
  • The net sales for the quarter were up by around 55.9% YoY driven by growth across all the verticals, especially the multimodal transport operations which accounts for around 87% of the revenues. This included revenue from recent acquisitions - US-based logistics company Econocaribe Consolidators Inc. that was acquired in September this year and Netherlands based logistics company FCL Marine Agencies Rotterdam (through its step down subsidiary company Ecohold NV for an undisclosed amount).

  • The operating profits for the quarter grew by around 47% YoY. Barring Container Freight Service segment, all segments witnessed a growth in the operating profits on a YoY basis. The Project & Engineering Solutions segment (PES) segment also witnessed a turn around as compared to last year. However, the overall operating margins for the quarter declined to 7.3%, from 7.8% in the corresponding period last year. This was mainly on account of an increase in the operating expenses (from 68.3% last year to 71.6% in 3QFY14), partly offset by decline in staff expenses and other expenses.

    Segmental summary
    CFS (Rs m) 3QFY13 3QFY14 Change 9MFY13 9MFY14 Change
    Revenues 756 825 9.1% 2,328 2,372 1.9%
    EBIT 275 258 -6.2% 892 725 -18.7%
    EBIT Margin 36.4% 31.3%   38.3% 30.6%  
    MTO (Rs m) 3QFY13 3QFY14 Change 9MFY13 9MFY14 Change
    Revenues 8,186 13,372 63.4% 24,247 30,465 25.6%
    EBIT 385 472 22.5% 1,356 1,249 -7.9%
    EBIT Margin (%) 4.7% 3.5%   5.6% 4.1%  
    PES (Rs m) 3QFY13 3QFY14 Change 9MFY13 9MFY14 Change
    Revenues 893 1,072 20.0% 3,409 3,157 -7.4%
    EBIT -156 152 nm 323 413 27.9%
    EBIT Margin (%) -17.5% 14.2%   9.5% 13.1%  

    Cost breakup
    (Rs m)  3QFY13 3QFY14 Change 9MFY13 9MFY14 Change
    Operating expenses 6,646 10,864 63.5% 20,115 25,121 24.9%
    as a % of sales 68.3% 71.6%   67.9% 70.4%  
    Staff expenses 1,473 2,182 48.2% 4,251 5,253 23.6%
    as a % of sales 15.1% 14.4%   14.4% 14.7%  
    Other expenses 720 1,081 50.2% 2,016 2,437 20.9%
    as a % of sales 7.4% 7.1%   6.8% 6.8%  
    Provision for doubtful debts 131 (73) nm 281 (61) nm
    as a % of sales 1.3% nm   0.9% nm  
    Total expenses 8,970 14,054 56.7% 26,663 32,750 22.8%
    as a % of sales 92.2% 92.7%   90.0% 91.8%  

  • The net profits for the quarter grew by around 58% YoY on the back of higher revenues from overseas subsidiary. The depreciation expenses during the quarter declined 11% YoY while interest expenses increased by 13.1% YoY. The growth in the bottomline was also supported by 130% YoY growth in the other income.
What to expect?
The company's performance during the quarter was healthy considering the macroeconomic environment and weak container shipping market. The latest acquisitions will help company diversify business across regions. However, an economic recovery is yet to happen and the company may face sluggish market in the near future. As per the management, going forward, the company will focus on consolidation rather than acquisitions.

At the current price, the stock is trading at 12.3 times its trailing twelve months earnings. We suggest investors to remain patient and Hold the stock from a long term perspective. We will be updating the subscribers with the target price soon. They should also ensure that the stock does not form more than 3% of their portfolio. For further details on asset allocation investors should have a look at the asset allocation guide.

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