November 24, 2016 / 16:45 IST
Allcargo’s (AGL) Q2FY17 operational performance was weaker than expected primarily on account of margin pressure in MTO and project logistics. Lower tax rate of 21.7% in Q2FY17 Vs 29% in Q1FY17, aided reported earnings. However, we were surprised by the 8% volume growth reported in MTO in a sluggish global trade. Growth was aided by the key markets of India, China and South East Asia. CFS business volumes were flat, however margins improved by 420bps YoY primarily on account of long standing containers and ODC bond cargoes.
We like AGL for its consistent cash generation & strong management bandwidth, however considering the lack‐lustre earnings in FY17 & most expansions to bear fruits only from FY18, we await better entry points. AGL currently trades at 14x Dec‐17E earnings and a EV/EBIDTA of 7.3x. Maintain “Accumulate” with a TP of Rs 184 (earlier TP Rs 202).
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