Buy Allcargo Global Logistics; tgt of Rs 175: Asit C. Mehta

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Buy Allcargo Global Logistics; tgt of Rs 175: Asit C. Mehta

Asit C. Mehta is bullish on Allcargo Global Logistics and has recommended buy rating on the stock with a target of Rs 175 in its February 9, 2011 research report.

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Asit C. Mehta is bullish on Allcargo Global Logistics and has recommended buy rating on the stock with a target of Rs 175 in its February 9, 2011 research report.

"Allcargo Global Logistics (Allcargo) declared its Q4CY10 and CY10 results that were in line with our expectation. Allcargo recorded consolidated net sales of Rs 263.3 billion, growth of 41.8% YoY in CY10. The company reported net profit of Rs 1.7 billion, growth of 31.3% YoY in CY10."

"Considering the recovery in global trade, CFS volumes improved by 28% YoY and 11.7% QoQ to 61,637 TEUs. Realisation per TEU also improved by 11.1% YoY and 12.5% QoQ, owing to a blend of higher dwelltime and increase in handling revenue. MTO volumes remained subdued owing to focus on higher profit margin FCL (full container load) cargo and increasing competition from smaller players, the impact of which was muted given the improvement in realization. Two Honkong based companies which were acquired during the quarter contributed ~Rs 30 million to the net profit in Q4CY10. Revenue from Equipment hiring division dipped by 24.6% sequentially owing to lower contribution from project cargo. Equipments are been acquired as per schedule and Allcargo has an order book of ~Rs 1,750 million including ~Rs 550 million in project cargo."

"We have introduced CY12E EPS at Rs  19.5. At the current price of Rs 137 the stock is trading at a P/E multiple of 9x its CY11E EPS of Rs 15.3 and 7x its FY12E EPS of Rs 19.5. Considering, continuous and sustainable expansion in EBITDA margin and increasing global penetration proves positive for Allcargo. However, given the higher interest cost burden tapering down the profitability margins than earlier expected, we have revised our target price downwards, valuing the stock at 9x CY12E EPS and arrive at a target price of Rs 175. Given the potential upside of 28% on the revised target price, we recommend investors to BUY the stock at current levels," says Asit C. Mehta research report.

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To read the full report click on the attachment