Report by- Sabyasachi Bhattacharya
Allcargo Logistics Q2 review; Company looking good for the long run-
Multimodal logistics company AllCargo Logistics delivered a strong operating performance in the second quarter of FY19. The earnings are anticipated to improve as the end market is witnessing a gradual shift to organised transporters. The company has multiple triggers and remains well positioned to scale the domestic business as well as gain share in the global trade market. For the quarter ended September 2018, AllCargo’s revenues increased 12 percent year-on-year (YoY) to Rs 1,737 crores driven by the healthy volume growth across all three business verticals – Multi-Modal Transport Operations (MTO), Container Freight Station (CFS) and Project & Engineering Solutions (PES). Operating performance was also strong as the earnings before interest, tax, depreciation and amortization (EBITDA) was 19 percent higher than last year. MTO, Allcargo’s largest revenue segment, continued to gain share in global trade and reported healthy volume growth of 22 percent YoY. CFS volumes grew 22 percent YoY. The incremental volumes were driven by Kolkata operations as well as an increased share of Direct Port Delivery at JNPT. Both these segments have a strong operating history and generate a return on capital in excess of 25 percent. The performance of PES segment continues to be a drag on the overall business. In Q2FY19, the segment reported an operating loss of nearly a crore despite the 34 percent jump in the topline. Low asset utilization, on account of subdued capex activity in the power, oil & gas, cement and steel sectors, is the primary reason for the weak operational performance. The management is hopeful of an improved performance in coming quarters as the project transportation has an executable order book of nearly Rs 175 crore. In the equipment business, it has an order-book of Rs 75 crore which needs to be executed over next 6-10 months. To reduce the idle capacity amidst subdued demand environment, the management has sold some of its assets (cranes & trailers) at 1.5x book value. The asset monetization would not only free up locked-in capital but also allow the segment to achieve break-even much faster. The logistics sector is witnessing a consolidation of warehouses post the implementation of Goods and services tax (GST). To tap into the market opportunity, Allcargo has decided to monetise its land banks across Bangalore (110 acres), Jhajjar (180 acres) and Hyderabad (30 acres) through the development of logistics parks. The construction at these locations is under way and revenue benefits from these facilities would start accruing from next financial year. The company aims to offer warehousing, contract logistics and first and last mile connectivity through these multi modal logistics parks. Further, the company is evaluating to set-up new warehouses across locations – Ahmedabad, Pune, Kolkata and Chennai. Investors should take advantage of the market volatility to build their positions in the stock over the next 3-6 months. We anticipate the positive developments will result in an acceleration in earnings towards the second half of next fiscal year. Further, an improvement of return ratios (FY18 RoCE was subdued at 10.6 percent) in line with the earnings could trigger a re-rating for Allcargo Logistics.
Source- MoneyControl, Purple Trades Research Department
Indian markets register their 7th consecutive bullish day-
Chart source- Upstox
Indian markets had a good outing today as Indices, Nifty and Sensex, both moved forward. As you can see on the chart given above, Nifty had a Gap-Up opening after which the Index moved upwards. It did encounter a resistance at the level of 10,960 but soon broke it and moved further up. The last hour of the trading session today saw some selling in the Index due to which it closed a little lower. In the end bulls continued their momentum on Wednesday as fall in crude oil prices spurred the rally in equities. The Nifty managed to end above 10,900-mark. Among sectors, banks, automobiles, consumption, and infrastructure names were the big gainers, while the Nifty Midcap index rose over a percent. IT and pharma were the big losers. Asian Paints, Axis Bank, Indiabulls Housing and Bajaj Finserv were the big gainers, while Sun Pharma, Infosys, and HCL Technologies lost the most. At the close of market hours, the Sensex was up 137.25 points or 0.38% at 36484.33, and the Nifty up 52.80 points or 0.48% at 10961.50. The market breadth was positive as 1594 shares advanced, against a decline of 984 shares, while 147 shares were unchanged. Minda Corporation shares gained 1 percent after research house Edelweiss Securities said Bharat Stage VI norms would benefit the company immensely. Lemon Tree Hotels shares gained 2 percent as the company added new hotel property in Pune, Maharashtra. Commercial Engineers and Body Builders shares were locked in 5 percent upper circuit at Rs 24.70 after the company received order for wagons from Indian Railways. Mishra Dhatu Nigam shares rallied 2 percent after the company has finalised one order worth about Rs 600 crore. Jubilant Foodworks shares rallied 5 percent after global research firm PhillipCapital raised price target of the stock to Rs 1,845 from Rs 1,760 earlier, implying 43.4 percent potential upside from Tuesday’s closing. Capital First and IDFC Bank shares rallied 4 percent after both companies announced completion of their merger on Tuesday. Shares of Indiabulls Real Estate (IBRE) jumped 8 percent after the board approved a scheme of arrangement to facilitate divestment of assets in Chennai to the US-based Blackstone Group.
Let’s take a look at the heat map-
Let’s take a look at the performance of major Indices-
Global markets had a Bullish day today as most of the major Indices were seen in the GREEN. NASDAQ along with CAC, FTSE, DAX and Asian Indices such as Straits Times and Hang Seng, KOSPI were all seen in the GREEN. The only Index that saw some type of loss today was NIKKEI.
Source- MoneyControl, Purple Trades Research Department
Key Points for Traders to watch out for while trading Nifty tomorrow-
- 10,950 is a short term support for Nifty.
- If Nifty breaks 10,950 then it has the potential to go down.
- 10,980 is a short term resistance for Nifty.
- If Nifty breaks 10,980 then it has the potential to go up.
Top sectors that moved the market today- Data source- Moneycontrol
Top Gainers for today- Data source- Moneycontrol
Top losers for today- Data source- Moneycontrol