Shares of Allcargo Logistics Ltd. gained after Phillip Capital (India) Pvt. upgraded the firm to 'buy', as it expects the demerger of container freight stations and realty businesses to create shareholder value.
The brokerage has upgraded the logistics company and revised the target price from Rs 451 to Rs 444, implying an upside return potential of 30%.
The consolidated revenue for continuing operation—restated—declined by 26.8% year-on-year to Rs 40.9 billion in the third quarter. The revenue in Allcargo's multimodal transport operations fell 29.4% to Rs 36.7 billion as compared with the same period in the previous fiscal, the research house said in a note on Sunday.
Revenue from Gati, the express business, increased by 5.3% year-on year to Rs 4.3 billion. Total Ebitda for continuing operations fell 47.2% year-on-year to Rs 2.29 billion. Ebitda margins in multimodal transport operations business declined from 7.48% in the third quarter of 2023.
"Express business (Gati) reported EBIT loss of Rs 85 million compared to loss of Rs 16 million in Q3 FY22. Profit before tax declined by 60.7% year-on-year to Rs 1.4 billion, while adjusted profit for continuing operations declined by 59% year-on-year from Rs 3 billion in Q3 FY22 to Rs 1.24 billion in Q3 FY23," the note said.
Less-than-container-load, or LCL volumes, fell 11.5% and full-container load volumes were down by 2.2% in the October–December period.
Ocean freight rate continued to decline with a sharp correction in spot freight rates. However, it had limited impact on profitability as a large part of the rates were pass-through.
Profitability in LCL business was impacted due to lower volume and network utilisation, which is expected to recover as China gets back to normalcy, the note said.
Multimodal transport operations acquired a 75% stake in fair trade in Germany for 115 million euros. The business has also added capabilities in Turkey by acquiring 100% stake in Asiapac Equity Investment .
Allcargo holds a 50.2% stake in Gati, which is the leading player in express logistics and management. It is expecting a turnaround in Gati, according to the note.
The company is building quality infrastructure to drive the next phase of growth.
Allcargo Logistics' board has approved acquisition of a 30% stake in GKPEL—part of Gati—from Kintetsu World Express Inc. for Rs 4 billion. The logistics company has also completed an agreement with Blackstone Inc. to sell 90% in a warehousing special purpose vehicle, which has resulted in debt reduction by Rs 2.95 billion and cash flow of Rs 1.35 billion.
Shares of Allcargo Logistics closed 6.05% higher on Monday, compared with a 0.56% decline in the benchmark Nifty.
Of the six analysts tracking the company, five maintain 'buy' and one recommends 'sell'. The return potential of the stock is 29%.
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