Management Meet Update: Allcargo Logistics Ltd (ALL)
Strong relationship with shipping lines, vast experience and wide network in the Multimodal Transport (MTO) segment, global presence, experienced management team and efforts taken by the company to improve operational performance have translated in strong operational performance for ALL in FY16 despite weak global trade. Going forward, the company intends to expand its foot-print in the east coast of the country with a new CFS in Kolkata, continue to make value accretive small acquisitions in the MTO segment, improve utilization in the projects division and take rational steps to bring down operational cost. We estimate ALL to report 5.8% volume CAGR in the MTO segment and 4.5% volume CAGR in the CFS segment over FY16 to FY18E, with inflation adjusted tariffs will help ALL to maintain margins at ~9.3% and earnings CAGR of 11% over FY16 to FY18E. We also estimate ALL to be the biggest beneficiary of any recovery in trade and GST implementation. We retain estimates and maintain "BUY" on ALL with an unchanged TP of Rs 215 at 16x FY18E earnings.
Result Update: NBCC (India) Ltd
NBCC Q1FY17 results were below our estimates on account of lower than expected execution in PMC business and sharp decline in real estate revenue. Net revenue for the quarter was at Rs 12.64 bn and grew by 16% yoy against our estimates of Rs 14.8 bn (with 29% yoy growth) for the quarter. This was led by below expected 21% yoy growth in PMC business (Vs estimated 42% growth) while real estate business witnessed 76% yoy decline (Vs estimated 53% decline) on slowdown in the sector. EBITDA for the quarter grew by 35% yoy to Rs 449 mn (Vs Rs 550 mn estimates) with EBITDA margins at 3.5% (vs estimates of 3.7%). The margins on yoy basis have declined by 70 bps yoy on adjusted basis as last year employee expenses included Rs 130 mn of one time medical benefits. NBCC has a strong total order book of Rs 710 bn, including new redevelopment orders of Rs 250 bn approved by the government in July 2016. This gives strong revenue growth visibility for the next 4-5 years. However the pick-up in execution of major redevelopment projects would take time. The stock has witnessed strong run-up post Q4FY16 results and is presently trading at premium PE multiple of 27.6x on FY18E EPS of Rs 9.2. Hence we revise our rating to REDUCE (Vs Buy earlier) with revised target price of Rs 261 (Vs Rs 229 earlier) factoring in new orders.
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