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Allcargo Logistics: A disappointing quarter - Views on News from Equitymaster
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Allcargo Logistics: A disappointing quarter
Nov 28, 2013

Allcargo Logistics Ltd has announced results for the second quarter of financial year 2013-14 (2QFY14). The topline for the quarter registered a growth of 5.7% YoY while the net profits declined by 28.9%. Here is our analysis of the results.

Performance summary
  • Net sales for the quarter registered a growth of 5.7% YoY (up 9.3% QoQ).
  • The operating profit (EBIDTA) for the quarter declined by 12.7% YoY (up 3.4% QoQ) with EBITDA margins at 8.7% (versus 10.5% in corresponding quarter last year and 9.2% in 1QFY14).
  • The net profits for the quarter witnessed a decline of around 28.9% YoY (up 9.5% QoQ) with net profit margins at 3.9% versus 5.8% in the corresponding quarter last year (3.9% in 1QFY14).
  • During the quarter, the company has acquired 100% interest in US based Econoacribe Consolidators, through its wholly owned subsidiary ECU line. Econoacribe Consolidators is one of the largest LCL (less than container load) consolidators in US market.

Consolidated financial summary
(Rs m) 2QFY13 2QFY14 Change 1HFY13 1HFY14 Change
Sales 10,141 10,719 5.7% 19,889 20,523 3.2%
Expenditure 9,078 9,790 7.8% 17,693 18,696 5.7%
Operating profit (EBDITA) 1,064 928 -12.7% 2,196 1,827 -16.8%
EBDITA margin (%) 10.5% 8.7%   11.0% 8.9%  
Other income 347 81 -76.6% 396 200 -49.6%
Interest (net) 23 106 358.7% 173 212 22.0%
Depreciation 457 326 -28.5% 740 663 -10.5%
Profit before tax (before excep. Items) 930 578 -37.9% 1,678 1,153 -31.3%
Pretax margin (%) (before excep. Items) 9.2% 5.4%   8.4% 5.6%  
Exceptional items 0 0 nm 0 0 nm
Pretax profit 930 578 -37.9% 1,678 1,153 -31.3%
Pretax profit margins (%) 9.2% 5.4%   8.4% 5.6%  
Tax 277 131 -52.8% 414 298 -28.0%
Profit after tax/(loss) 653 447 -31.6% 1,264 854 -32.4%
Net profit margin 6.4% 4.2%   6.4% 4.2%  
Minority interest 61 25.6 -58.0% 95.8 46.7 -51.3%
Share of associates 0 0 nm 0 0 nm
Net profit post minority 592 421 -28.9% 1,168 808 -30.8%
Net profit margin for the group 5.8% 3.9%   5.9% 3.9%  
No. of shares (m)         126  
Diluted earnings per share (Rs)*         10.6  
Price to earnings ratio (x)**         10.2  
*On a trailing 12 months basis

What has driven performance in 2QFY14?
  • The net sales for the quarter were up by around 9.3% QoQ mainly on account of growth in the volumes and revenue in MTO (Multimodal Transport Operations) and CFS (Container Freight Stations) segments.

  • In the MTO segment, the volumes were up by 3.9% YoY (up 5.2% QoQ). The revenues in MTO segment were up 8.2% YoY (up 10.7% QoQ). The operating profit margins post depreciation (EBIT margins) for the segment stood at 4.6% during the quarter, down by around 230 basis points (2.3%) on a YoY basis. However, the margins improved slightly as compared to 1QFY14

  • In the CFS segment, the volumes declined by 15.1% YoY. Despite a decline in the volumes, the revenues in CFS segment registered a growth of 10.8% YoY (up 13.9% QoQ). However, the operating profit (after depreciation) margin at 31.4% were down by around 810 basis points (8.1%) on a YoY basis. Sequentially, the volumes, revenues and operating profits (post depreciation) all grew by 6.3%, 13.9% and 24.1% respectively.

  • In the P&E segment, the company registered a decline of 22% and 82% in the revenues and EBIT during the quarter. Sequentially also, the revenues declined by around 7% QoQ while operating profit margins slipped to 4.2% from 20.5% in the previous quarter. Segmental breakup

    Segmental summary
    CFS (Rs m) 2QFY13 2QFY14 Change 1HFY13 1HFY14 Change
    Revenues 743 824 10.8% 1,572 1,547 -1.6%
    EBIT 293 259 -11.7% 971 777 -19.9%
    EBIT Margin 39.5% 31.4%   61.7% 50.2%  
    MTO (Rs m) 2QFY13 2QFY14 Change 1HFY13 1HFY14 Change
    Revenues 8,305 8,982 8.2% 16,060 17,093 6.4%
    EBIT 573 412 -28.1% 617 467 -24.3%
    EBIT Margin (%) 6.9% 4.6%   3.8% 2.7%  
    PES (Rs m) 2QFY13 2QFY14 Change 1HFY13 1HFY14 Change
    Revenues 1,222 952 -22.0% 2,418 1,974 -18.4%
    EBIT 229 40 -82.3% 487 250 -48.7%
    EBIT Margin (%) 18.7% 4.2%   20.1% 12.7%  

    Cost breakup
    (Rs m)  2QFY13 2QFY14 Change 1HFY13 1HFY14 Change
    Operating expenses 6,885 7,411 7.6% 13,468 14,256 5.9%
    as a % of sales 67.9% 69.1%   67.7% 69.5%  
    Staff expenses 1,409 1,633 15.9% 2,779 3,071 10.5%
    as a % of sales 13.9% 15.2%   14.0% 15.0%  
    Other expenses 687 714 3.9% 1,299 1,356 4.4%
    as a % of sales 6.8% 6.7%   6.5% 6.6%  
    Provision for doubtful debts 97 32 -66.9% 147 13 -91.3%
    as a % of sales 1.0% 0.3%   0.7% 0.1%  
    Total expenses 9,078 9,789 7.8% 17,693 18,696 5.7%
    as a % of sales 89.5% 91.3%   89.0% 91.1%  

  • The net profits for the quarter declined by around 29% YoY. Apart from a poor performance at the operating level, the net profits declined due to fall in other income and increase in the interest expenses. The depreciation expenses during the quarter declined by 28.5% YoY. The effective tax rate for the quarter stood at 22.7%, as compared to 29.8% in the corresponding quarter last year.
What to expect?

The company being in the logistics business is highly susceptible to domestic and global macroeconomic climate. The slowdown in the investment cycle and delay in project execution has further impacted the P&E segment.

That said, the company is well diversified and established player. It has further strengthened its position during the quarter by acquiring Econoacribe Consolidators in the US. We are optimistic about the long term prospects of the company. However, it is difficult to set a time line when macroeconomic scenario will be favorable. We have updated the risk profile of the company keeping in mind the change on broad economic environment. At the current price, the stock is trading at 10.2 times the trailing twelve months earnings. 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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