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Maybank Kim
Allcargo (Buy)
CMP: ₹169.75
Target: ₹220
Our target price for Allcargo Logisitics is based on SOTP (sum-of-the-parts) valuation. We believe premium is warranted as after two years of flat EPS, AGLL is expected to report net profit growth of 10 per cent/ 14 per cent in FY18/19.
Net profit growth is led by organic and inorganic growth in CFS, and restructuring in P&E business. We would like to highlight that Blackstone’s complete exit from the company removes a major overhang on the stock.
AGLL currently trades at 40 per cent discount to its peers in LCL business and 35 per cent discount to its peers in CFS business.
Risks: a) MTO is linked to global trade volumes. Any slowdown in global trade could affect its business.
b) Threat from technology aggregators becoming real could impact LCL business.
c) CFS is linked to India’s export/ import volumes. And thus need to watch global trade. Dwelling time in the CFS business might also fall over time with the introduction of e-customs and direct port deliveries. This could eat into AGLL’s long-run CFS margins.
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