Allcargo Logistics - Strong Top-Line Growth; Higher Capital Charges Impact Near Term Profitability - Karvy

During 1QFY13, Allcargo Logistics (AGLL) delivered consolidated revenue EBITDA and PAT growth of 14%, 11% and -16% YoY respectively. Weaker INR (both YoY and QoQ) boosted global MTO realisation growth leading to 14% YoY revenue growth. The CFS revenue growth of 24% benefitted from higher container volumes handled while the dwell time reduced. Project revenue grew 28% YoY on account of business ramp up post the expansion over the last one year.

The MTO division EBIT margin remained flat YoY thereby boosting EBIT growth of 14% YoY. Lower dwell time impacted the margins to contract 1020 bps YoY but higher volume growth moderated the EBIT decline to 2% YoY. Project EBIT rose 25% YoY on better utilisation.

Higher capital charges impacted PAT decline of 16% YoY. Higher capital charges as the project and CFS divisions continue to expand and related interest costs impacted PAT growth which declined 16% YoY to Rs556mn (vs our est of Rs709mn). Interest cost doubled YoY while depreciation rose 17% YoY. We expect capital charges to remain high over the next two years.

Ramp-up to fuel growth: We expect AGLL's top-line to grow by 22% and 7% YoY in FY13-14E led by the ramp up in the project division and the commissioning of the additional 100K TEUs CFS capacity (currently 144K TEUs) near JNPT. The project division has order-book of Rs3bn thereby providing revenue visibility of 3-5 quarters. We expect debt levels to come down from current ~Rs9bn to Rs5.5bn by FY14E on lower rising cash flow from operations of ~Rs8bn.

Re-iterate 'BUY' on the stock: We value the stock at 10x (25% discount to its six year median P/E of 13.4x) its FY14E EPS (earlier 10.5x its avg FY13-14E EPS). We maintain our "BUY" recommendation on the stock with a TP of Rs206 (earlier Rs213).

Source : Equity Bulls

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