ICICI Securities

Allcargo Logistics (Buy)

CMP: ₹107.9

Target: ₹131

Allcargo Logistics is an India-based holding company. The company is engaged in providing integrated logistics solutions. It offers logistics services across multi-modal transport operations, inland container depot, container freight station operations, contract logistics operations, and project and engineering solutions.

We met the management of Allcargo Logistics (ALL). The key discussion points were:

i) The risk associated with the logistics park investment; ii) timing of the possible divestitures in the same to manage the risk profile; iii) the trend in current warehousing investments witnessed in India and why Allcargo couldn't secure any bit of $5 billion funding that has already gone into grade A warehousing space in India; and iv) broad business volumes and profitability change.

Allcargo has committed itself to an investment of ₹1,500 crore to develop 10 million sqft space to start with over the next four years. The key question is, given a global trade slowdown, can ALL manage the transition without unduly stretching the balance sheet. Given the current valuation and the existing OCF, we feel risk reward remains favourable.

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