Narnolia Financial Advisors

Allcargo Logistics (Buy)

CMP: ₹108.8

Target: ₹147

Key Highlights: a) The largest segment MTO is leveraging its global presence of LCL (less than container load) business to tap ever growing FCL (full container load) market. Volume growth is likely to be in range of 10-15 per cent.

b) Post the consolidation of shipping industry, freight rate has started improving across the freight market and will improve going ahead.

c) JNPT started DPD scheme in 2016 and currently handling 44 per cent containerised cargo through DPD route. Though the majority of the DPD cargo is still routed through CFS as the CFS players has started offering integrated services like warehousing, inventory management, sorting, etc.

f) Last year was sluggish in terms of the new capacity addition in wind power and as result of it Allcargo’s P&E business suffers lower utilisation. Now with understanding and acceptability of new bidding methodology capacity addition likely to bounced back.

g) Company continuously exploring opportunities in 3PL (third party logistics) business, Warehousing and Multi Model Logistic Park (MMLP) and expect to invest ₹400-700 crore over the next 4-5 years. 3 PL market is expected to grow at 19-21 per cent to ₹57,000 crore by 2020 according to CRISIL report.

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