May 13, 2011

COMPANY RESULTS

REPORT REVIEW
Analyst Chetan Kapoor +91-22-4322 1232 chetan.kapoor@idbicapital.com

Allcargo Global Logistics Ltd.

Results inline; volumes disappoint

BUY

Summary
Allcargo Global Logistics Ltd. (AGLL) results were inline with our expectations despite lower than expected volume growth in the MTO/NVOCC segment mainly due to higher realizations booked. The revenue on consolidated basis grew ~25% to Rs7,315 mn. EBIDTA margins for the quarter stood at 12.3%, up 250bps YoY. Earnings were up 46.6% to Rs499 mn. The growth in revenues can be mainly ascribed to higher realizations in the NVOCC segment which saw volume growth of 8% YoY (ECU Line). The higher realizations underline the companys ability to pass on freight rate hikes, which are done with a delay. Volume growth in the MTO/NVOCC segment has been slow and hence, we have reduced our volume growth estimates for ECU Line to 13% for CY11E from 20% earlier. Also, with the likely initiation of operations of the new CFS near the existing JNPT location from February 2012, we expect the new facility will start contributing in CY12 itself. Hence, we have revised upwards our volume growth estimates for CY12 to 15% for JNPT. These two reasons have led to a fall in earnings by 3.6% in CY11E and increase in earnings by 8% in CY12E. Based on the acquisition of land in JNPT and a likely growth in volumes in ECU Line we maintain our positive view. We revise upwards our target price to Rs196 at 12x CY12E EPS, with rollover to CY12. We maintain a BUY rating on the stock with 19% upside from current levels.

Nifty: 5,545; Sensex: 18,531

CMP Target Price Potential Upside/Downside Key Stock Data Sector Logistics Bloomberg / Reuters AGLL IN / ALGL.BO Shares o/s (mn) 130.5 Market cap. (Rs mn) 21,544 Market cap. (US$ mn) 480 3-m daily average vol. 38,899 Price Performance 52-week high/low -1m Absolute (%) (1) Rel to Sensex (%) 5 Shareholding Pattern (%) Promoters FIIs/NRIs/OCBs/GDR MFs/Banks/FIs Non Promoter Corporate Public & Others Relative to Sensex
135 120 105 90 75 60 Nov-10 May-10 Dec-10 May-11 Jul-10 Oct-10 Jun-10 Jan-11 Feb-11 Aug-10 Sep-10 Mar-11 Apr-11

Rs165 Rs196 19%

Key Highlights
Consolidated revenues increased by 25% YoY to Rs7,315 mn on the back of growth in the ECU Line revenues which grew 27% YoY and growth in the CFS and Hindustan cargo divisions which grew 43% and 66% respectively. The growth in revenues in these segments was mainly due to across the board higher realizations. The volumes in the ECU Line segment grew to ~55,369 TEU (LCL+FCL), 8% YoY. Realizations grew from Rs82,267 to Rs93,194/TEU. This indicates the passing of higher increase in freight rates during the quarter. The EBIDTA margins improved on the back of turnaround in ECU Line margins to 5.7% as compared to 3.4% in Q1CY10.

Rs192/125 -3m -12m 20 (9) 18 (17)

69.8 23.2 2.1 2.7 2.2

Earnings improved by 47% YoY to Rs499 mn mainly due to the step up in EBIDTA margins. Standalone revenues grew 15.5%YoY to Rs1,895 mn. EBIDTA margins increased to 28.1%, up 280bps. Earnings grew 37% YoY to Rs391 minute; hence, standalone entity still contributes major portion of earnings. Standalone MTO LCL volumes were down 9%YoY as also CFS volumes were down in the main JNPT area by 13% YoY. Though the growth in CFS volumes in Chennai (46%) led to overall growth of 24% in CFS volumes. Table: Financial snapshot
Year CY09 CY10 Revenue EBITDA EBITDA (%) Adj. PAT EPS (Rs) 20,609 26,329 31,515 35,996 2,185 2,790 3,620 4,279 10.6 10.6 11.5 11.9 1,327 1,709 2,005 2,132 10.6 13.1 15.4 16.3 15.5 12.6 10.7 10.1 9.9 7.9 6.1 4.8 16.4 15.5 15.3 13.9

(Rs mn)
P/E (x) EV/EBITDA (x) RoE (%) RoCE (%) 14.9 16.1 16.3 16.5

AGLL

Sensex

CY11E CY12E

Source: Capitaline

Source: Company; IDBI Capital Research

Q1CY11 Result Review Allcargo Global Logistics Ltd.

Table: Financials consolidated

Year-end: December Net Sales EBITDA EBITDA margin (%) Other Income Interest Depreciation PBT Tax PAT Minority Interest Adjusted PAT after minority EPS (Rs)
Source: Company; IDBI Capital Research

(Rs mn)
Q1CY11 7,315 897 12.3 81 99 180 699 157 541 43 499 3.8 95.5 179.2 19.8 63.1 110.8 53.1 225.6 46.6 YoY (%) 24.9 56.8 CY10 26,329 2,790 10.6 259 220 545 2,282 475 1810 101 1709 13.1 CY11E 31,515 3,620 11.5 276 450 781 2,666 533 2133 128 2005 15.4 6.7 104.6 43.3 16.8 12.3 17.8 26.5 17.3 YoY (%) 19.7 29.8 CY12E 35,996 4,279 11.9 112 495 872 3,024 756 2268 136 2132 16.3 (59.4) 10.0 11.7 13.4 41.8 6.3 6.3 6.3 YoY (%) 14.2 18.2 5,858 572 9.8 42 35 150 428 75 354 13 340 2.6

Q1CY10

Table: Segmental standalone

Segmental Results Segmental revenue MTO CFS Equipment (Includes Project Cargo) Less Intersegment revenues Segment Results MTO CFS Equipment (Includes Project Cargo) Less Interest Other unallocable Add Other unallocable income PBT PBIT Margins (%) MTO CFS Equipment (Includes Project Cargo) Capital Employed MTO CFS Equipment hiring division
Source: Company; IDBI Capital Research

(Rs mn)
Q1CY10 1,640 517 447 710 (34) 385 34 214 137 Q1CY11 1,895 552 638 757 (53) 541 52 299 190 40.7 51.8 39.9 39.2 42.9 6.8 YoY (%) 15.5 CY09 5,154 3,178 1,516 628 (168) 1,349 408 770 171 CY10 7,006 2,231 2,007 2,910 (142) 1,671 157 911 603 23.9 (61.4) 18.2 253.0 YoY (%) 35.9 (29.8) 32.4 363.4

(23) (87) 51 325 6.6 47.8 19.3 4,851 709 1,885 2,257

(53) (144) 127 471 9.4 46.8 25.1 7,175 152 2,149 4,874 47.9 (78.6) 14.0 116.0

(151) (277) 148 1,069 12.8 50.8 27.2 4,522 813 1,894 1,815

(132) (394) 306 1,451 7.1 45.4 20.7 6,488 184 1,978 4,326 43.5 (77.4) 4.4 138.3 106.5

Q1CY11 Result Review Allcargo Global Logistics Ltd.

Table: ECU line financial

Q1CY10 Revenues EBIDTA EBIDTA (%) PAT
Source: Company; IDBI Capital Research

( mn)
Q1CY11 80.6 4.6 5.7 2.6 132.7 YoY (%) 27.9 98.3 63.0 2.3 3.7 1.1

Table: CFS volumes

Q1CY10 JNPT Chennai Mundra Total
Source: Company; IDBI Capital Research

(TEU)
Q1CY11 30,078 22,607 6,881 59,566 YoY (%) (13.3) 46.3 34.4 7.8 34,710 15,449 5,119 55,278

Table: CFS Realisations

Q1CY10 JNPT Chennai Mundra
Source: Company; IDBI Capital Research

(Rs/TEU)
Q1CY11 11,800 9,138 7,544 YoY (%) 6.7 42.8 47.4 11,063 6,400 5,119

Outlook and Valuation

AGLL has recorded lower than expected volume growth for ECU Line despite the Chinese acquisition. Hence, we will keep close watch on the volume growth for the ECU Line entity in the coming quarters. With the start of the CFS operations at the new facility at JNPT, volume growth will restart at the high realization JNPT region. We expect the JNPT operation to retain realizations mainly due to the niche offering (LCL cargo) and increase in the handling of western hinterland cargo at the port. This is according to the thesis of expected transfer of northbound cargo to Mundra and Pipavav port. The new CFS facility at JNPT is expected to require a total capex of Rs800 mn of which the land acquisition has already been completed. The companys initiative to reduce its exposure to the equipment business is encouraging due to its likely positive impact on the return ratios. It currently has 115 cranes in this segment which has a total orderbook of Rs2.4 bn executable over a span of one year. Maintain BUY with a target price of Rs196 based on 12x our CY12E EPS.

Q1CY11 Result Review Allcargo Global Logistics Ltd.

Financial summary
Profit & Loss Account
Year-end: December Net sales Growth (%) Operating expenses EBITDA Growth (%) Depreciation EBIT Interest paid Other income Pre-tax profit Tax Effective tax rate (%) Net profit Adjusted net profit Growth (%) Shares o/s (mn nos) CY09 20,609 (10.9) (18,424) 2,185 (0.6) (545) 1,640 (232) 286 1,695 (260) 15.4 1,434 1,327 18.5 125 CY10 26,329 27.8 (23,538) 2,790 27.7 (545) 2,245 (220) 259 2,284 (475) 20.8 1,810 1,709 28.8 131 CY11E 31,515 19.7 (27,894) 3,620 29.8 (781) 2,840 (450) 277 2,667 (533) 20.0 2,133 2,005 17.4 131

(Rs mn)
CY12E 35,996 14.2 (31,718) 4,279 18.2 (872) 3,407 (495) 112 3,024 (756) 25.0 2,268 2,132 6.3 131

Cash Flow Statement

Year-end: December Pre-tax profit Depreciation Tax paid Chg in working capital Other operating activities Cash flow from operations (a) Capital expenditure Chg in investments Other investing activities Cash flow from investing (b) Equity raised/(repaid) Debt raised/(repaid) Dividend (incl. tax) Chg in minorities Other financing activities Cash flow from financing (c) Net chg in cash (a+b+c) CY09 1,695 592 (208) (51) 2,028 (2,166) (840) (3,006) (267) (1,395) (126) (88) 4,631 2,754 1,776 CY10 2,284 614 (250) (2,055) 593 (1,236) 962 (274) 292 1,156 (126) (103) 1,219 1,539 CY11E 2,667 781 (533) (852) 2,062 (2,014) (2) (2,016) 1,500 (127) 672 2,045 2,091

(Rs mn)
CY12E 3,024 872 (756) (561) 2,579 (986) (2) (988) 500 (129) (8,284) (7,913) (6,322)

Balance Sheet
Year-end: December Net fixed assets Investments Other non-curr assets Current assets Inventories Sundry Debtors Cash and Bank Loans and advances Total assets Shareholders' funds Share capital Reserves & surplus Total Debt Secured loans Unsecured loans Other liabilities Curr Liab & prov Current liabilities Provisions Total liabilities Total equity & liabilities Book Value (Rs)
Source: Company; IDBI Capital Research 4

(Rs mn)
CY09 7,938 1,668 5,463 2,354 916 2,164 15,070 9,946 266 9,545 2,044 2,044 2,224 2,987 2,900 87 5,124 15,070 80 CY10 8,561 706 8,788 3,475 2,693 2,600 18,054 12,048 559 11,253 3,200 3,200 3,604 2,529 2,402 126 6,006 18,054 92 CY11E 9,794 708 11,409 3,789 4,232 3,369 21,918 14,181 559 13,259 4,700 4,700 5,104 2,761 2,633 127 7,737 21,918 109 CY12E 9,908 710 14,400 4,337 6,322 3,721 25,025 16,449 559 15,391 5,200 5,200 5,604 3,101 2,972 129 8,576 25,025 126

Financial Ratios
Year-end: December Adj EPS (Rs) Adj EPS growth (%) EBITDA margin (%) Pre-tax margin (%) RoE (%) RoCE (%) Turnover & Leverage ratios (x) Asset turnover Leverage factor Net margin (%) Net Debt/Equity Working Capital & Liquidity ratios Inventory days Receivable days Payable days CY09 10.6 11.4 10.6 8.2 16.4 14.9 1.5 1.7 6.4 0.1 0 42 56 CY10 13.1 23.2 10.6 8.7 15.5 16.1 1.6 1.5 6.5 0.0 0 48 35 CY11E 15.4 17.4 11.5 8.5 15.3 16.3 1.6 1.5 6.4 0.0 0 44 33 CY12E 16.3 6.3 11.9 8.4 13.9 16.5 1.5 1.5 5.9 -0.1 0 44 33

Valuations
Year-end: December PER (x) Price/Book value (x) PCE (x) EV/Net sales (x) EV/EBITDA (x) Dividend Yield (%) CY09 15.5 2.1 11.0 1.1 9.9 0.5 CY10 12.6 1.8 9.6 0.8 7.9 0.5 CY11E 10.7 1.5 7.7 0.7 6.1 0.5 CY12E 10.1 1.3 7.2 0.6 4.8 0.5

Q1CY11 Result Review Allcargo Global Logistics Ltd.

Notes

Vikrant Oak Head Institutional Equities Sonam H. Udasi Head Research Dealing

(91-22) 4322 1385 (91-22) 4322 1375 (91-22) 4322 1150

vikrant.oak@idbicapital.com sonam.udasi@idbicapital.com dealing@idbicapital.com

Key to Ratings Stocks: BUY: Absolute return of 15% and above; ACCUMULATE: 5% to 15%; HOLD: Upto 5%; REDUCE: -5% to -15%; SELL: -15% and below. IDBI Capital Market Services Ltd. (A wholly owned subsidiary of IDBI Ltd.) Registered Office: 5th floor, Mafatlal Centre, Nariman Point, Mumbai 400 021. Phones: (91-22) 4322 1212 Fax: (91-22) 2285 0785 Email: info@idbicapital.com
Disclaimer This document has been prepared by IDBI Capital Market Services Ltd (IDBI Capital) and is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. No person associated with IDBI Capital is obligated to call or initiate contact with you for the purposes of elaborating or following up on the information contained in this document. Recipients may not receive this report at the same time as other recipients. IDBI Capital will not treat recipients as customers by virtue of their receiving this report. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. In so far as this report includes current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. Opinions expressed are current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis, the information discussed in this material, IDBI Capital, its directors, employees are under no obligation to update or keep the information current. Further there may be regulatory, compliance, or other reasons that prevent us from doing so. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. IDBI Capital, its directors and employees and any person connected with it, will not in any way be responsible for the contents of this report or for any losses, costs, expenses, charges, including notional losses/lost opportunities incurred by a recipient as a result of acting or non acting on any information/material contained in the report. This is not an offer to sell or a solicitation to buy any securities or an attempt to influence the opinion or behaviour of investors or recipients or provide any investment/tax advice. This report is for information only and has not been prepared based on specific investment objectives. The securities discussed in this report may not be suitable for all investors. Investors must make their own investment decision based on their own investment objectives, goals and financial position and based on their own analysis. Trading in stocks, stock derivatives, and other securities is inherently risky and the recipient agrees to assume complete and full responsibility for the outcomes of all trading decisions that the recipient makes, including but not limited to loss of capital. Opinions, projections and estimates in this report solely constitute the current judgment of the author of this report as of the date of this report and do not in any way reflect the views of IDBI Capital, its directors, officers, or employees. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject IDBI Capital and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. IDBI Capital, its directors or employees or affiliates, may from time to time, have positions in, or options on, and buy and sell securities referred to herein. IDBI Capital or its affiliates, during the normal course of business, from time to time, may solicit from or perform investment banking or other services for any company mentioned in this document or their connected persons or be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or their affiliate companies or act as advisor or lender / borrower to such company(ies)/affiliate companies or have other potential conflict of interest. This report may provide hyperlinks to other websites. Except to the extent to which the report refers to the website of IDBI Capital, IDBI Capital states that it has not reviewed the linked site and takes no responsibility for the content contained in such other websites. Accessing such websites shall be at recipient's own risk. E-mail is not a secure method of communication. IDBI Capital Market Services Limited cannot accept responsibility for the accuracy or completeness of any e-mail message or any attachment(s). This transmission could contain viruses, be corrupted, destroyed, incomplete, intercepted, lost or arrive late. IDBI Capital, its directors or employees or affiliates accept no liability for any damage caused, directly or indirectly, by this email.