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Allcargo: Macro concerns drag performance
Jun 26, 2013

Allcargo Logistics Ltd has announced results for the fourth quarter of financial year 2012-13 (4QFY13) and financial year 2012-2013. The topline for the quarter grew by 9.4%. However, the net profits were down by 73%. Here is our analysis of the results.

Performance summary
  • Topline for the quarter grew by 9.4% YoY. For the full year (FY13), the revenues stood at Rs 39.2 bn.
  • The operating profit (EBIDTA) for the quarter declined by 45.5% YoY with EBITDA margins at 6.8% (down from 13.7% in corresponding quarter last year). For FY13, EBITDA margins stood at 9.1%.
  • The net profits for the quarter witnessed substantial decline of around 72.6% YoY with net profit margins at 1.8%, down from 7.0% in the corresponding quarter last year. For FY13, the net profit margins stood at 4.3%.
  • The board of directors of the company have recommended a dividend of Rs.1.50 per equity share for FY13.

Consolidated financial summary
(Rs m)  Jan - March 2012 Jan - March 2013 Change FY12 (15 months) FY13 (12 months) Change#
Sales  8,730 9,553 9.4% 42,796 39,268 -8.2%
Expenditure  7,534 8,902 18.1% 37,510 35,700 -4.8%
Operating profit (EBDITA)  1,195 651 -45.5% 5,286 3,568 -32.5%
EBDITA margin (%)  13.7% 6.8%   12.4% 9.1%  
Other income  135 202 50.3% 449 656 46.1%
Interest (net)  133 109 -18.2% 683 415 -39.2%
Depreciation  433 359 -17.2% 1,337 1,473 10.2%
Profit before tax (before excep. Items) 764 386 -49.5% 3,715 2,336 -37.1%
Pretax margin (%) (before excep. Items) 8.7% 4.0%   8.7% 5.9%  
Exceptional items 4 0 nm 4 0 nm
Pretax profit 759 386 -49.2% 3,711 2,335 -37.1%
Pretax profit margins (%) 8.7% 4.0%   8.7% 5.9%  
Tax 155 199 28.4% 734 512 -30.2%
Profit after tax/(loss)  604 186 -69.1% 2,977 1,823 -38.7%
Net profit margin  6.9% 2.0%   7.0% 4.6%  
Minority interest 0 22 nm 141 129 -8.3%
Share of associates 10 4 -63.2% 10 4 -63.2%
Net profit post minority 614 168.40 -72.6% 2,845 1,697 -40.3%
Net profit margin for the group 7.0% 1.8%   6.6% 4.3%  
No. of shares (m)          126  
Diluted earnings per share (Rs)*          13.4  
Price to earnings ratio (x)**          6.8  
*On a trailing 12 months basis
#The numbers used to calculate the change are not comparable since the numbers for FY12 are
for 15 months while FY13 numbers include performance over 12 months

What has driven performance in 4QFY13?
  • The net sales for the quarter grew just by 9% YoY. This was mainly on account of poor volumes in the CFS and MTO segment, which was offset by better realizations. In the MTO segment, volumes grew by 2% YoY for the quarter while volumes in the CFS segment declined by 16% YoY. On a sequential basis, the volumes in MTO and CFS segment declined by 4% and 3% respectively. The revenue growth for CFS and MTO segments stood at 13% YoY and 18% YoY for the quarter. The decline in the PES segment was mainly due to low capacity utilization. For full year, the volumes in the MTO segment were up 3% while volumes in the CFS segment were down by 9% YoY. The PES segment for the quarter witnessed 31% YoY decline in the revenues (down 22% QoQ) due to low capacity utilizations.

    Physical performance parameters^
    MTO volumes (TEUs) 4QFY12 4QFY13 Change (YoY) 3QFY13 Change (QoQ) FY12 FY13 Change
    Export 34,136 34,479 1% 35,531 -3% 139,675 143,994 3%
    Import 32,008 33,282 4% 34,807 -4% 135,530 140,732 4%
    Total 66,144 67,761 2% 70,338 -4% 275,205 284,726 3%
    Export ratio 52% 51%   51%   51% 51%  
    CFS volumes (TEUs)
    Export  10,509 9,169 -13% 8,012 14% 40,806 35,979 -12%
    Import 45,121 37,710 -16% 40,549 -7% 204,369 185,930 -9%
    Total 55,630 46,879 -16% 48,561 -3% 245,175 221,909 -9%
    ^Q4 FY12 and FY12 represents Quarter and 12 months Year Ended on 31st March , 2012

    Segmental summary
    CFS (Rs m) Jan- March 2012 Jan- March 2013 Change FY12 (15 months) 12 months FY13 Change#
    Revenues 761 857 12.7% 3530 3122 -11.5%
    EBIT 274 248 -9.8% 1615 1125 -30.4%
    EBIT Margin 36.0% 28.9%   45.8% 36.0%  
    MTO (Rs m) Jan- March 2012 Jan- March 2013 Change FY12 (15 months) 12 months FY13 Change#
    Revenues 6,598 7,811 18.4% 33,972 31,954 -5.9%
    EBIT 395 182 -54.0% 1,638 1,493 -8.9%
    EBIT Margin (%) 6.0% 2.3%   4.8% 4.7%  
    PES (Rs m) Jan- March 2012 Jan- March 2013 Change FY12 (15 months) 12 months FY13 Change#
    Revenues 1,430 986 -31.0% 5,514 4,301 -22.0%
    EBIT (103) (78) -23.8% 1,119 390 -65.1%
    EBIT Margin (%) -7.2% -7.9%   20.3% 9.1%  
    #The numbers used to calculate the change are not comparable since the numbers for FY12 are
    for 15 months while FY13 numbers include performance over 12 months

  • The operating profits for the quarter witnessed a huge decline due to onetime adjustment of lease accounting in 4QFY12. The margins in the MTO segment contracted during the quarter because of the seasonal impact (January to March are weaker months because of Chinese new year impact). Besides, the management is also facing some competitive pressure in certain geographies. In the PES segment, the company faced losses at the operating level. High depreciation and lower utilization of equipment in PES segment led to EBIT margins of 9.1% in FY13.The margins in the CFS segment declined during the quarter and full year because of poor volumes. The CFS segment witnessed a 9% YoY decline in the volumes in FY13, mainly due to the decline in import laden containers on the ports.

    Cost breakup
    (Rs m)  Jan- March 2012 Jan- March 2013 Change FY12 (15 months) 12 months FY13 Change#
    Operating expenses 5,875 6,748 14.9% 28,577 26,994 -5.5%
    as a % of sales 67.3% 70.6%   66.8% 68.7%  
    Staff expenses 1,317 1,379 4.7% 6,087 5,634 -7.4%
    as a % of sales 15.1% 14.4%   14.2% 14.3%  
    Other expenses 330.5 743.2 124.9% 2,731 2,759 1.0%
    as a % of sales 3.8% 7.8%   6.4% 7.0%  
    Provision for doubtful debts 11.7 32.4 176.9% 115.2 313.3 172.0%
    as a % of sales 0.1% 0.3%   0.3% 0.8%  
    Total expenses 7,534 8,902 18.1% 37,510 35,700 -4.8%
    as a % of sales 86.3% 93.2%   87.6% 90.9%  
    #The numbers used to calculate the change are not comparable since the numbers for FY12 are for 15 months
    while FY13 numbers include performance over 12 months

  • The net profits for the quarter declined by around 73% YoY. This was mainly on account of weak performance across the segments, one time adjustment of lease accounting in 4QFY12 and high tax rates.

What we expect?
As per the management, the capex going ahead is likely to be conservative, mainly for the maintenance purposes. For CFS segment, the management expects business to depend on overall port volumes which in turn will rely on macroeconomic environment. As per the management, while the order remains strong (Rs 2.2 bn for both project and engineering), most of its customers have postponed the capex plans on account of a weak macroeconomic scenario. As per the management, the capacity utilization in the equipment business is likely to remain low in the next one or two quarters. The company has not added much of the equipment to PES segment is FY13 and is unlikely to do so in FY14. As per the management, some of its new clients in the project transportation will start execution of their projects in the second quarter.

The management expects volumes in the MTO segment to grow at 8% to 9% in the current fiscal year.

The CFS segment witnessed a 9% YoY decline in the volumes, mainly due to the decline in import laden containers on the port . As per the management, it is not that the company has lost its customers or market share, but decline is an overall outcome of broad macroeconomic trends.

Currently, the stock is trading at a trailing 12 months PE of 6.8. While the upsides are limited in the near term, we believe that the company has strong fundamentals and it is a good long term investment. We suggest our investors to buy the stock with a long term perspective.

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