Shares of Allcargo Logistics Ltd (ALLCARGO) surged nearly 8% to hit a new 52-week high of Rs 306.90 on the BSE on Friday after the company posted strong results for the September 2023 quarter and gave a positive outlook.
Allcargo Logistics Q2 Net Profit Jumps Over 3X YoY On Operating Leverage
Allcargo Logistics reported a consolidated net profit of Rs 21.84 crore for the quarter ended September 2023, a massive 313% increase compared to Rs 5.29 crore profit posted in the corresponding quarter last year. Revenue from operations grew 18% year-on-year to Rs 4,737 crore during the quarter.
The stellar growth in bottomline was aided by operating leverage, resulting from network optimization, digitization, automation and cost rationalisation across businesses. This is the fifth consecutive profitable quarter for the company.
Earnings before interest, taxes, depreciation and amortization (EBITDA) jumped 55% YoY to Rs 353 crore while EBITDA margins improved 190 basis points to 7.5%.
Allcargo Delivers Industry-Leading Revenue, EBITDA Growth
Allcargo Logistics has set a new benchmark by delivering industry-leading revenue growth of 18% along with robust EBITDA growth of 55% on YoY basis. The company’s strategy to focus on asset-light business model is paying rich dividends.
Segment-wise, the container freight station (CFS)/inland container depot (ICD) business continued its growth trajectory by recording 23% YoY revenue growth. The company’s project & engineering solutions (P&E) business too maintained its growth momentum, reporting a 16% YoY revenue growth.
The P&E order book remains healthy at Rs 1,700 crore which provides revenue visibility for the next 12 months. The contract logistics division posted 8% YoY growth driven by new client additions, yield improvements and cost optimization initiatives.
Allcargo Outperforms Peers Across Parameters
Allcargo Logistics has clearly outshone its peers across various parameters in Q2 FY23. Sun Pharma Advanced Research Company (SPARC) reported a 1.50% rise, Quess Corp’s shares climbed 3.75%, while Allcargo Logistics zoomed 7.72% to hit a new 52-week high.
In terms of financial performance too, Allcargo has posted industry-leading revenue and profitability growth compared to its peers. This shows the company’s sharp focus on network optimization, digitisation and prudent capital allocation is reaping rewards.
Strong Promoter Holding, Low Debt Offers Comfort
Allcargo Logistics stock offers comfort owing to strong 69.92% promoter holding. This shows the commitment of the promoters towards the future growth of the company.
With a debt-to-equity ratio of just 0.68, the balance sheet of the company remains healthy. The company follows asset-light business model which entails lower requirement for debt funding. This offers flexibility to pursue organic as well as inorganic growth opportunities in the future.
Mutual Funds, FIIs Raise Stakes In Allcargo
Domestic mutual funds have raised their holding in Allcargo Logistics to 1.28% as on June 30, 2022 compared to 1.05% in the previous quarter. Similarly, foreign institutional investors (FIIs) too increased their stake in the company to 10.87% as on September 2023 versus 7.95% in June quarter.
The consistent rise in shareholding of mutual funds and FIIs reflects their confidence in long-term prospects of Allcargo Logistics.
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Stock Technicals Indicate Further Upside
Technically, Allcargo Logistics stock looks positive as it has given a breakout above previous resistance level of Rs 300. The stock has strong support at Rs 290-295 levels.
As per technical indicators, the stock has witnessed a golden crossover with 50-day EMA crossing above the 200-day EMA. This signals bullish sentiment ahead.
Oscillators like RSI and MFI are placed above 60 showing the uptrend is likely to continue. The stock has immediate resistance placed around Rs 315-320 zone. Once that is taken off, the stock can quickly rally to test lifetime high of Rs 346.
Outlook and Prospects
The September 2023 quarter has sets the pace for strong earnings growth for Allcargo Logistics in coming years. With economic activity picking up globally, the outlook for logistics sector appears bright.
Allcargo Logistics is progressing well on its stated long-term goals – to achieve market leadership in all its business segments, capitalize on operating leverage benefits and enhance return on capital employed.
WithLean operations, high operating leverage and focus on asset-lightmodel, Allcargo Logistics is poised for sustainable, profitable growth in the years ahead.
The stock is currently trading at reasonable valuations with 1 year forward PE multiple of 15 based on FY24 earnings estimates. Given the growth prospects, the valuations offer decent upside potential from current levels.
Investors can look to buy the stock on dips for a long-term portfolio. Strong Q2 results and bright outlook makes Allcargo Logistics a hot stock to ride India’s booming logistics wave.