Allcargo Logistics: On a growth voyage

The Centre’s endeavour to integrate and improve India’s long-term growth potential is evident in the recent passage of the Goods and Services Tax (GST) Bill and demonetisation move. The short-term liquidity squeeze caused by demonetisation should be partially offset by the payout from the Seventh Pay Commission and a pick-up in rural demand following a good monsoon.

These efforts, in tandem with the Centre’s increased investment focus on infrastructure creation such as roads, railways and coastal waterways, should bode well for companies such as Allcargo Logistics — that offer multi-modal logistic services — over the next two to three years.

With a strong balance sheet, Allcargo Logistics is well-positioned to fund its expansion plans. The stock’s current price-to-earnings ratio (trailing 12 months) is at its three-year average of 16 times. This is lower than that of its peer Gateway Distriparks and Transport Corporation of India, which trade close to 21 times.

Allcargo Logistics operates in three main divisions — multi-modal transport operations, container freight stations, and project and engineering solutions.

The multi-modal transport operations division, also known as ‘ECU worldwide’, globally connects close to 4,000 ports and operates in three segments — road, rail and waterways predominantly and accounted for nearly 80 per cent of the company’s revenue in 2015-16.

The acquisition of Avvashya CCI to expand the company’s contract logistics business and investment to build a logistics park in Jhajjar, Haryana, need mention. The division increased its growth volume by 9 per cent between FY15 and FY16. The total volume for FY16 was at 4.6 lakh teus. This is notwithstanding the near-zero growth in the international Exim market in the same period. Despite flat revenue across FY15 and FY16, improved operating efficiency increased operating profit by 21 per cent. . The revenue and operating profit for this division for 2015-16 stands at ₹4,762 crore and ₹267 crore, respectively.

Similarly, in the container freight station (CFS) division, Allcargo is a leading player with CFS facilities in all the three major ports — JNPT, Mundra and Chennai — which account for close to 80 per cent of the container traffic in India.

Allcargo Logistics’ inland container depot (ICD) facilities are located at Dadri and Pithampur. Container traffic in India is expected to double between 2016 and 2021. In line with this, CFS and ICD facilities are expected to grow.

With land banks close to 200 acres, a new CFS facility under construction at the Kolkata port and possible expansion of CFS capacity in JNPT, the company is expected to see healthy growth in this segment.

The total volume in the CFS division has grown at an annualised rate of close to 10 per cent between FY14 and FY16. The revenue and operating profit for this segment in 2015-16 are ₹443 crore and ₹158 crore, respectively.

The project and engineering solutions division should benefit with the Centre’s emphasis on increasing coastal movements to transport engineering and oversized goods and equipment over the next couple of years.

The revenue and operating profit between FY14 and FY16 have grown at an annualised rate of 12.7 and 12 per cent, respectively. The revenue and operating profit for FY16 are ₹549 crore and ₹160 crore, respectively.

The company’s consolidated revenue and profit grew at an annual average of 8.2 per cent and 36.6 per cent, respectively, between FY14 and FY16. The consolidated revenue and profit for the year ending 2015-16 are ₹5,688 crore and ₹278 crore, respectively. This is higher by 1 and 15.8 per cent, respectively, compared with FY15.

At the end of the June 2016 quarter, the total debt and net debt-to-equity ratio stood at ₹585 crore and 0.16 times, respectively.

The consolidated revenue and profit for the June 2016 quarter is ₹1,399 crore and ₹61 crore, respectively, down 4.5 and 8.3 per cent, respectively, compared to the corresponding previous quarter.

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