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Allcargo Logistics fails to cheer investors, despite business recast, 20% EBITDA growth outlook

The consensus 12-month target price on the stocks is Rs 469, which indicates a 25 percent upside from current level

March 08, 2023 / 12:51 PM IST
(Representative image)

(Representative image)

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Allcargo Logistics shares traded flat on March 8 even as the company announced a ramp-up in the contract logistics business and an exit from its non-core portfolio. The stock traded at Rs 374.30 on the NSE at 11.30am, lower by 0.01 percent from the previous close.

At an enterprise value of Rs 373 crore, Allcargo Logistics will buy the remaining 38.87 percent stake from its partners in contract logistics business. It is engaged in managing inventories and providing third-party supply chain solutions. After this, Allcargo’s total stake in the business will be 100 percent.

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The board also approved the sale of smaller non-core customs clearance business, in which Allcargo will sell its 61.13 percent stake for an enterprise value of Rs 42 crore.

“EBITDA of contract logistics will continue to increase going forward. EBITDA per quarter to continue to grow over 15-20 percent over the next few quarters,” Chief Strategy Officer Ravi Jakhar told CNBC-TV18. “You’ll continue to hear from us on further streamlining of businesses.”

The company had earlier announced demerger of Allcargo Terminals and TransIndia, which received NCLT approval. It will now have two distinct business segments under International Supply Chain and Express and Contract Logistics. In 2019, the company had acquired a controlling stake in GATI.

Though the stock has gained 3 percent in the past three trading sessions, it is down 8 percent in 2023 so far. In Q3, the company saw a decline both in sales and in net profit. The constant streamlining of business has not helped its operating margins either. It has contracted to 5 percent in the December quarter from 8 percent a year back.

Also Read: Allcargo Logistics Q3 profit declines 53%

That said, analysts are bullish on the stock. According to Bloomberg, it has four 'buy' calls and one 'sell' call. The consensus 12-month target price is Rs 469, which indicates a 25 percent upside from current level.

“Industry preferences are shifting towards integrated supply-chain services and other sophisticated solutions such as inventory optimisation and data analytics from isolated offerings such as transportation or warehousing,” said a recent Motilal Oswal Financial Services report.

Moneycontrol News
first published: Mar 8, 2023 12:49 pm