Target: ₹500

CMP: ₹407.70

Allcargo Logistics (ALL) is the world’s less-than-container-load (LCL) market leader with a 14 per cent share from less than 9 per cent a decade ago. The 2021 Nordicon acquisition gave it a leadership position in the Nordic region, and it has not looked back since.

ALL forayed in the express PTL business through the 2020 Gati acquisition. Organised players are just 10 per cent of the market and gaining share as GST drives sector formalisation. The management is streamlining costs at Gati and EBIT margins should be -0.5 per cent in FY23E vs -3.8 per cent in FY21. I

CFS (3 per cent of rev.) and Logistics Parks (including equipment rental) are being demerged into two companies. Gateway Distriparks, a CFS/ICD peer, trades at 15.3x PE FY23E vs ALL’s 13.2x PE. Logistics Park (1 per cent of rev.) has 100 acres of development potential at Jhajjar with ₹250-300 crore equity invested. This is apart from the 5-6 mn sq ft built being sold to Blackstone.

We believe ALL’s value-creation proposition is being underestimated as the business is yet to be understood. We see 14 per cent EPS CAGR in FY24-26 between PTL turnaround and MTO volume growth. Downside risks: MTO margin dip more than expected; incremental write-offs in Gati.

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