Allcargo Logistics - Result update - Centrum

CFS volumes under pressure, MTO still strong

Allcargo Logistics' (Allcargo) Q5 results were below our estimates. Though margins were higher on the back of strong performance by the MTO segment (domestic + ECU Line) it was also aided by translation gains. CFS volumes were under pressure, declining both at JNPT and for the first time at Chennai. This has made us cautious on the company's newly expanded capacity at JNPT, leading to a revision of our volume estimates and margin expectations. We have lowered our CFS volume expectations by 27% in FY13 and 23% for FY14. We have also lowered our margin estimate by 62bp for FY13 to 12.9% and 20bp to13.4% in FY14. However, with overall volumes and margins remaining steady led by MTO business, we remain upbeat on Allcargo and expect improvement in margins led by CFS and ECU Line. Maintain Buy with a revised target price of Rs184.

Q5 results marginally below expectations: Consolidated revenue grew 19.7% YoY to Rs8,757mn, 9.6% below expectations. Operating profit at Rs1,242mn up 28.5% YoY was 3.4% above estimates mainly on the back of higher margins in the ECU Line business due to translation gains. EBITDA margins at 14.2% improved 192bp YoY and 178bp above estimates. Adjusted net profit at Rs607mn was 5.4% below our estimate while net margin at 6.9% was in line with 6.6% estimated.

MTO business maintains steady volume growth: Domestic MTO revenue increased 19.1% YoY mainly on the back of healthy volumes. While average realisations fell 2.1% YoY to Rs84,700 per container, volumes grew 21.6% YoY to 7,753 containers. ECU Line's Q5 revenue improved 15.7% YoY to Rs5,968mn on the back of both healthy volumes and realisations. While volumes were up 5.5% YoY to 58,436 containers, realisation improved 9.6% YoY to Rs102,106.

CFS volumes and margins under pressure but realisations continue to remain high: CFS revenue grew 8.0% YoY mainly on the back of healthy realisations. Overall CFS realisations improved 18.8% YoY to Rs12,730 per container. However, volumes at JNPT CFS declined 15.0% YoY to 25,566 TEUs, raising doubts on the utilisation levels for the new capacity (~100,000 TEUs p.a.) expected to be operational at JNPT by Q2FY13. Chennai CFS recorded its first ever volume decline (down 18.6% YoY) to 18,411 containers.

Maintain Buy with a revised target price of Rs184: At the CMP, the stock trades at 6.4x and 5.6x FY13E and FY14E earnings respectively and appears attractive. While we have marginally revised our estimates, we lower our target multiple (10% discount) to factor in the increasing risk of global slowdown and its impact on trade volumes. We value the stock at 9x FY14E earnings, giving a revised target price of Rs184 (earlier: Rs220).

Source : Equity Bulls

Keywords