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Allcargo Logistics: Net profit down 33% - Views on News from Equitymaster
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Allcargo Logistics: Net profit down 33%
Aug 19, 2013

Allcargo Logistics Ltd has announced results for the first quarter of financial year 2013-14 (1QFY14). The topline for the quarter registered a flattish growth of 0.5% YoY. However; the net profits were down by 33%. Here is our analysis of the results.

Performance summary
  • Topline for the quarter registered a flattish growth of 0.5% YoY (up 3% QoQ)
  • The operating profit (EBIDTA) for the quarter declined by 20.7% YoY (up 37% QoQ) with EBITDA margins at 9.2% (versus 11.6% in corresponding quarter last year and 6.8% in 4QFY13).
  • The net profits for the quarter witnessed a decline of around 33.3% YoY (up 130% QoQ) with net profit margins at 4.2% versus 6.3% in the corresponding quarter last year (2.0% in 4QFY13).
Consolidated financial summary
Rs m 1QFY13 1QFY14 Change
Sales 9,754 9,804 0.5%
Expenditure 8,622 8,906 3.3%
Operating profit (EBDITA) 1,132 898 -20.7%
EBDITA margin (%) 11.6% 9.2%  
Other income 50 119 139.4%
Interest (net) 150 105 -30.1%
Depreciation 284 336 18.6%
Profit before tax (before excep. Items) 748 575 -23.1%
Pretax margin (%) (before excep. Items) 7.7% 5.9%  
Exceptional items 0 0  
Pretax profit 748 575 -23.1%
Pretax profit margins (%) 7.7% 5.9%  
Tax 137 167 22.1%
Profit after tax/(loss) 611 408 -33.3%
Net profit margin 6.3% 4.2%  
Minority interest 35 21 -39.2%
Share of associates 0 0  
Net profit post minority 576 387 -32.9%
Net profit margin for the group 5.9% 3.9%  
No. of shares (m)   126  
Diluted earnings per share (Rs)*   0.0  
Price to earnings ratio (x)**   #DIV/0!  
*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 1QFY14?
  • The net sales for the quarter reported flattish growth of 0.5% YoY. The slowdown was mainly on account of lackluster global and domestic economic scenario. Segmentwise, the sales in Multimodal Transport Operations (MTO) segment witnessed a growth of 4.6% YoY while sales in the Container Freight Service (CFS) segment and Project & Engineering Solution (PES) division declined by around 13% YoY and 16% YoY.

    Segmental summary
    CFS (Rs m) 1QFY13 1QFY14 Change 
    Revenues 829 723 -12.8%
    EBIT 323 208 -35.6%
    EBIT Margin 39.0% 28.8%  
    MTO (Rs m) 1QFY13 1QFY14 Change 
    Revenues 7,755 8,111 4.6%
    EBIT 382 366 -4.2%
    EBIT Margin (%) 4.9% 4.5%  
    PES (Rs m) 1QFY13 1QFY14 Change
    Revenues 1,215 1,022 -15.9%
    EBIT 260 210 -19.2%
    EBIT Margin (%) 21.4% 20.5%  

    The operating margins for the quarter were down by 2.4 percentage points (YoY). However, on a sequential basis, the performance improved substantially mainly in the PES and MTO segment. The margins in the Multimodal Transport Operations (MTO) segment stood at 4.5% as compared to 4.9% in the corresponding quarter last year. In CFS segment, the operating margins stood at 28.8% versus 39.0% last year. In the PES segment, EBIT margins stood at 20.5% versus 21.4% in 1QFY13.

    Cost breakup
    (Rs m)  1QFY13 1QFY14 Change
    Operating expenses 6,589 6,846 3.9%
    as a % of sales 67.6% 69.8%  
    Staff expenses 1,371 1,438 4.9%
    as a % of sales 14.1% 14.7%  
    Other expenses 620 642 3.5%
    as a % of sales 6.4% 6.5%  
    Provision for doubtful debts 42 -19 nm
    as a % of sales 0.4% -0.2%  
    Total expenses 8,622 8,906 3.3%
    as a % of sales 88.4% 90.8%  

  • The net profits for the quarter declined by around 33% YoY. The other income and depreciation expenses for the quarter were up by 139% YoY and 18.6% YoY while interest expenses declined by 30% YoY. The effective tax rate was also higher during the quarter as compared to 1QFY14.
What to expect?

While the results don't impress when compared annually, the performance in the quarter ending June 2013 has been much better as compared to the preceding quarter (4QFY13). While the performance in CFS segment was disappointing on a sequential basis, the operating margins almost doubled and trebled in MTO and PES segment respectively.

Currently, the stock is trading at a trailing 12 months PE of 6.1. The stock has corrected significantly since our recommendation. This we believe is mainly on account of weak macroeconomic scenario and cyclical nature of the business. While we are still optimistic about the long term potential of the company, it is difficult to set a time line when macroeconomic scenario will be favourable. We have updated the risk profile of the company keeping in mind the change on broad economic environment. We suggest investors to remain patient and Hold the stock from a long term perspective but not buy more of it at the current juncture. 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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