MOSL: ALLCARGO LOGISTICS (Buy)-Profits impacted by higher provisioning in P&E segment
Allcargo Logistics: Profits impacted by higher provisioning in P&E segment
(AGLL IN, Mkt Cap USD0.4b, CMP INR120, TP INR163, 36% Upside, Buy)
- Margins impacted by higher provisioning: 4QFY18 revenue rose 13% YoY to INR15.4b (est. of INR19.8b), led by 18% YoY growth in MTO revenue. EBITDA stood at INR739m (-30% YoY, -21% QoQ), lower than our estimate of INR994m, due to higher provisions in the P&E segment. Adj. PAT fell 68% YoY (-47% QoQ) to INR185m (est. of INR444m), as the tax rate was higher at 65% v/s 18% in the year-ago period.
- MTO shows healthy improvement: MTO volumes grew 26% YoY to 159,951 TEUs in 4QFY18, primarily led by growth in FCL volumes. EBIT margin was stable at 4.1% with stabilization in the shipping freight rates. Realization fell 6% YoY to INR85,671/TEUs. Hence, revenue rose 18% YoY to INR13.3b.
- CFS impacted by Direct Port Delivery: CFS volumes were at 76,304 TEUs (+9% YoY), mainly due to commissioning of operations in Kolkata and a gain in DPD volumes at JNPT. EBIT margin was at 29.4% (-0.18pp YoY/flat QoQ).
- P&E provisioning remains elevated: P&E revenue declined 35% YoY to INR743m due to a decline in asset utilization (wind & power market impacted). P&E reported an EBIT loss of INR366m due to higher provisions for doubtful debt in 4QFY18.
- Management commentary: 1) P&E segment is expected to see utilization improvement to 50%+ from ~35% in 4QFY18, led by a pick-up in demand. 2) Provision to the extent of INR300m was made for FY18 toward doubtful debt in P&E segment. 3) Kolkata CFS is likely to breakeven soon, led by healthy utilization. 4) MTO market likely to grow at 3-4% YoY. 5) Volatility in shipping freight rates is exerting pressure on margins.
Allcargo Logistics Limited is an India-based holding Company. The Company is engaged in providing integrated logistics solutions. It offers logistics services across multimodal transport operations, inland container depot, container freight station operations, contract logistics operations, and project and engineering solutions. Its segments include Multimodal Transport Operations, which involves non-vessel owning common carrier operations related to less than container load consolidation and full container load forwarding activities; Container Freight Stations (CFS)/Inland Container Depot (ICD) Operations, which is involved in import/export cargo stuffing, de-stuffing, customs clearance and other related ancillary services, and Project & Engineering Solutions (P&E), which provides integrated end-to-end project, engineering and logistic services through a fleet of owned/rented special equipment, such as hydraulic axles, cranes, trailers, barges, reach-stackers, forklifts and ships.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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