Allcargo Logistics - Cheap stock
Available at attractive valuations
Company Overview
Allcargo Logistics Limited is a Mumbai-based logistics company. It offers multi-modal integrated logistics and transportation services worldwide. ALLCARGO acquired Gati in 2020 and has completed a demerger in May-2023.
ALLCARGO has two key business segments after the demerger.
International Supply Chain
Global #1 in LCL (less than container load) consolidation operating the largest global LCL network with 15% market share in operating markets
Market leadership in LCL provides a strong base for rapid expansion in FCL and air business
Express and Contract Logistics
Express contains the express business through the 2020 Gati acquisition.
Contract Logistics business got transferred to its 100% subsidiary Allcargo Supply Chain Private Limited on 17 May 2023.
LCL consolidation, which contributes to almost 70% of gross profit in the international supply chain business, has 15% global market share in LCL.
Share Details
NSE: ALLCARGO( allcargologistics.com)
Quality: Returns on capital employed in cash
Return ratio profile has changed since acquiring GATI in 2020.
Growth
The improvement in PAT margin has driven the PAT growth faster than the top-line growth.
Future Outlook
The company is guiding to grow the top-line from Rs 18,056 cr in FY23 to Rs 22,700-28,500 cr by FY26. This translates to a 8-16% top-line CAGR. On the EBIDTA front the company is guiding for an growth from Rs 1,250 cr to Rs 2,100-2500 cr which translates to a CAGR of 19-28% CAGR.
2023 as a year may continue to see sluggish growth but we estimate the economic environment to be positive in 2024, 2025 and 2026. So, we believe that in 2023, we would continue to see gradual expansion in the volume, and that will lead to improvement in the profitability.
EBITDA margins to improve on the back of express business hence PAT is expected to grow faster than the top-line.
So What????
If I currently hold the stock, I may continue holding it based on my past returns, expectations for future returns, and the availability of alternative stock ideas. If I intend to hold it then one needs to keep if the management aspirations for 2026. Additionally, one needs to check if the management aspirations are being met at the top end or the bottom end of the range.
If I don't currently own the stock, I might consider entering if one believes that the 2026 management aspirations will be met at the top-end of their guidance. At a 16% top-line and 28% bottom line CAGR the stock becomes quite attractive given that its currently available at a PE of 11.
Another factor adding to the margin of safety in the stock is that ALLCARGO is available at a free cash flow yield of 22% (free cash flow of Rs 151 cr in FY23 on a market cap of ~Rs 7,000 cr). The free cash flow yield makes it look even more attractive than the PE of 11 at which its currently trading.
Disclaimer
It is an analysis of the company data and not a stock recommendation
My analysis can be completely wrong and can change the next minute based on changes in my understanding of the company
I look to own good companies at prices where there is a path to market beating returns over decades