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Allcargo Global Logistics

Allcargo Global Logistics - key points.

The global recession has led to slowdown in the global trade. There has been significant slowdown in major export markets like US and Europe. Due to this the import and export activity in India has been significantly impacted. India's total exports have registered de-growth. India's exports have registered negative growth rate for four consecutive months. This has led to lower number of container handling at the Container Freight Station (CFS) facilities.

However due to liquidity crunch the importers are keeping the containers for longer durations with the CFS thereby increasing the ground rent income for the CFS players like Allcargo. This is compensating for the fall in volumes handled at the CFS.

JV with Hind terminals to ease the pressure on capex - however major benefits unlikely before H2CY10E.Allcargo is looking to set up 4 CFS / ICD facilities over next three years and it has already purchased land at Nagpur, Hyderabad, Bangalore and Indore. Indore ICD has recently commenced commercial operations and is likely to stabilize by H2CY09E. The other three ICDs are expected to be operational by H1CY10E.

Acquired 5.97% equity stake in Gateway Distriparks Ltd (GDL).

Allcargo has acquired 6,095,223 equity shares of GDL constituting 5.97% of the total paid up capital from the open market through M/s. Sealand Terminals Pvt. Ltd., which is the wholly owned subsidiary of Allcargo. It paid Rs.300 mn for this stake.

CY09E earning estimates and Valuations.

In CY09E, Allcargo is expected to report EPS of Rs.58.0 and CEPS of Rs.77.3 in
CY09E.Over CY07 to CY09E the revenues of Allcargo are expected to record CAGR of
19.0% and PAT is expected to record CAGR of 30.2%.Using the DCF method of valuation with 13.5% WACC (13.0% earlier) and 3.0% terminal growth rate,the price target works out to Rs.650.