Professional Documents
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Allcargo Research Report
Allcargo Research Report
Business Segment
Cranes 135
Trailers 394
Prime Mover 21
Ships 3
Others 5
Total 807
Contract Logistics
Contract logistics is one of the fastest growing sub-sector of logistics in India and is poised to grow substantially post
implementation of the Goods and Service Tax.
The Company had a presence in this segment since last few years. In FY2016-17, the Company expanded and strengthened
its presence in this segment by acquiring major equity stake in Avvashya CCI Logistics Private Limited (‘ACCI’).
ACCI is one of the predominant player in this segment managing activities for key clients in Chemicals, Auto and
Engineering, Pharma, Fashion and Retail sectors.
This segment is scalable and growth oriented.
Logistic Industry – An Overview
Global View
Global Logistics Industry includes all activities of the supply chain such as transportation, customer service, inventory
management, flow of information and order processing. Other activities of the supply chain are warehousing, material handling,
purchasing, packaging, information dissemination and maintenance among others. The Logistics market in terms of revenue was
valued at US$ 8185.46 billion in 2015 and is expected to reach US$15522.02 billion by 2023, growing at a CAGR of 7.5% from
2015 to 2024.The market in terms of volume was valued at 54.69 billion tons in 2015 and is expected to reach 92.10 billion tons
by 2024 growing at a CAGR of 6% from 2016 to 2024.
Indian Perspective
The Indian logistics sector is valued at USD$ 150 billion, contributing 14.4 % of country’s GDP. With the easing of FDI norms,
proposed implementation of GST, increasing globalization, growth of E-commerce, positive changes in the regulatory policies,
and government initiatives such as “Sagarmala”, “Make in India”, the sector is expected to touch $200 billion by 2020. In the
World Bank’s Logistics performance ranking 2016, India’s ranks has improved from 54 in 2014 to 35 in 2016, jumping 19 places.
Out of this USD 150 billion logistics cost, almost 99% is accounted for by the unorganized sector (such as owners of less than 5
trucks, affiliated to a broker or a transport company, small warehouse operators, customs brokers, freight forwarders, etc.), and
slightly more than 1%, i.e. approximately USD 1.5 billion, is contributed by the organized sector. However, the industry is
growing at a fast pace and if India can bring down its logistics cost from 14% to 9% of the GDP (level in the US), savings to the
tune of USD 50 billion will be realized at the current GDP level, making Indian goods more competitive in the global market.
Moreover, growth in the logistics sector would imply improved service delivery and customer satisfaction leading to growth of
export of Indian goods.
Contract Logistics
Contract logistics market in India is estimated at INR 110 billion (US$ 1.7 billion) in FY 2017
Contract logistics spend has grown at a faster pace than the overall logistics industry at 17% annually between
FY2012-2017.
Contract logistics market is expected to grow to INR 244 billion (US$ 3.8 billion) in FY 2022, nearly 2.2 times the
size of FY2017 market, at a CAGR of 17%.
Global Presence with owned network.
Being one of the largest CFS operators in India, Allcargo is the only company with significant presence at key container
ports of the country, viz JNPT, Chennai and Mundra, a new CFS at Kolkata port is expected to be operational soon.
These ports are in proximity to main industrial hubs, carry majority of the volumes and are preferred choice for customers
because of their strategic location. The three ports together handle around 75% of total container traffic of India.
Allcargo has leveraged its relationships with freight forwarders and major shipping lines by entering into CFS sector.
CFSs at JNPT, Chennai and Mundra with total installed capacity of 620,000 TEUs1 p.a. and ICDs at Pithampur and Dadri
with total installed capacity of 88,000 TEUs p.a.
Experience management team .
Started his career in the logistics industry in 1978 with
Shashi Kiran Shetty Inter-modal Transport and Trading Systems, Mumbai from
Executive Chairman where he moved to Forbes Gokak, a TATA Group Company.
Holds a Bachelor of Commerce degree
Competition Risk
This risk arises from more players wanting a share in the same pie. Like in most other industries, opportunity brings with itself
competition.They face different levels of competition in each segment, from domestic as well as multinational companies.
However, Allcargo has established strong brand goodwill in the market and a strong foothold in the entire logistics value spectrum.
They are one of the largest LCL Consolidator in the world, with 300+ offices in 160+ countries covering over 4,000 port pairs.
Their wide geographical presence and network across the globe helps them to generate higher volumes.They are working on a
blueprint to consolidate our position as the market leader and enter newer segments and offer their customers “a one-stop-shop”
for logistics services.
Trade Risk
Their business can be affected by the rise and fall in the levels of imports and exports in the country. Given the projected growth
in the Indian economy and expected recovery in global trade, rising spending in the infrastructure and manufacturing space and
increasing per capita and disposable income, it is estimated that imports will continue to rise steadily. The Company is also
focusing on its CFS/ ICD business, which is essentially dependent on imports of containerized cargo in India.Currently the EXIM
trade is volatile to some extent. However, with expectation of revival in the EXIM Trade, CFS business volume is expected to
grow. Since the Company operates in the diverse business verticals within the logistics space including Contract Logistics, it has
reduced its dependence on any particular business.Thus we feel this risk can be mitigated.
Regulatory Risk
If they are unable to obtain required approvals and licenses in a timely manner, their business and operations may be adversely
affected. They require certain approvals, licenses, registrations and permissions for operating their MTO and CFS/ICD business.
They may encounter delays in obtaining these requisite approvals, or may not be able to obtain such approvals at all, which may
have an adverse effect on Their revenues. Any change in policy for EXIM and Logistics can affect their business. However, the
Government has come up with a number of initiatives to boost the logistics sector and has planned massive investments in the
infrastructure sector. As all industry predictions suggest that this will be the trend in the future.
Currency Risk
The MTO revenues are generated by subsidiaries based outside India. While preparing the consolidated statements, the earnings
are translated into INR. Any fluctuations in forex will hence impact the financial statements of the company.
Execution Risk
The Company has undertaken number of projects in the last year and several more are in the pipeline. Project execution is largely
dependent upon land purchase, project management skills and timely delivery by equipment suppliers. Any delay in project
implementation can impact revenue and profit for that period.
Financial Statements
Quarterly Performance
Total Income has increased in last 2 quarter of fy18 due to volume growth in MTO business, but EBITDA has decrease in last 2
quarter of fy18 mainly on account of increase in expenses relating to lease rentals of managing the CFS in Mundra and reduced
contribution from P&E due to sale of unproductive and low yielding assets, decrease in asset utilization and increase in provision
for doubtful debts (conservative accounting policy followed by Company) & a conscious decision to move away from lower
ROCE business leading to strategic sale of low yielding assets. Crane segment has seen a decline in asset utilization due to lower
capex in wind sector, which is one of the clients for the crane hiring segment.
Income statement
In last 3 year if we have seen Revenue has grown at CAGR of 4.74% only but PAT has grown at CAGR of 14.36%. there is a wide
difference between Revenue growth and PAT growth, this is due to revenue mix composition. ALLCARGO has 3 segments MTO,
CFS, P&E In that CFS is high margin business, as compared to both businesses.
it has increased its portion in last 3to 4 years and rest 2 segments has de-grown or remain flat in % terms. This led to higher profit
growth in spite of lower sales growth.
3. New CFS at Kolkata port of 1,00,000 TEUS which is operational soon through this also there would be growth in sales in
CFS business.
Projection calculated as on 31st March 2017 is as follow:
We expect Net Sales, Operating Profit and Pat to grow at a CAGR of 12%, 15% and 20% from current level. Company is
available at P/E of 20.46x multiple and we expect P/E to rerate at 25x with a target price of Rs. 230. We recommend to
Invest in“Allcargo Logistic Ltd.” for mid to long term for decent return.
Source :
Company’s Annual Report
Company’s Presentation
Business Standard
Logistics Skill Council
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