Initiating Coverage |12 January 2016
Sector: Logistics
Allcargo Logistics
Right place, right time
Harshad Borawake
(HarshadBorawake@MotilalOswal.com); +91 22 3982 5432
Rajat Agarwal
(Rajat.Agarwal@motilaloswal.com); +91 22 3982 5558

Allcargo Logistics
Allcargo Logistics: Right place, right time
Summary ...........................................................................................................3
LCL leader; to benefit with shift in shipping trends ..............................................4
Domestic economic recovery augurs well for CFS/P&E ........................................10
Expect large FCF deployment to be RoE accretive ................................................15
Valuation and view.............................................................................................17
Company background .........................................................................................19
Financials and valuations ....................................................................................23
Key terms used throughout the report
MTO: Multimodal Transport Operations
NVOCC: Non vessel operating container carrier
CFS: Container Freight Station
ICD: Inland Container Depot
LCL: Less than container load
FCL: Full container load
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.
12 January 2016
2

Allcargo Logistics
BSE Sensex
24,682
S&P CNX
7,510
Initiating Coverage | Sector: Logistics
Allcargo Logistics
CMP: INR184
TP: INR243 (+32%)
Buy
Right place, right time
Steady growth in MTO; domestic GDP revival to benefit CFS, P&E
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val ( INR m)
Free float (%)
Financial Snapshot (INR Billion)
Y/E Mar
Sales
EBITDA
NP
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
2016E 2017E 2018E
61.9
5.7
2.9
11.6
22.0
85.7
14.4
15.9
15.6
2.1
68.3
6.4
3.6
14.3
22.9
98.2
15.5
17.6
12.7
1.8
74.9
7.3
4.4
17.4
21.7
113.4
16.4
19.1
10.6
1.6
AGLL IN
252.1
218/128
2/35/21
46.4
0.7
46.0
30.1
Allcargo Logistics gives an unique opportunity to participate in the (a) domestic
economic revival (through CFS and P&E) and (b) exposure to global LCL (less than
container load) consolidation market where it is one of the top two players (fast
growing sub-segment in container shipping) with presence in >90 countries.
Strong balance sheet, increasing FCF will help Allcargo to further consolidate in
global LCL market and can also look at monetizing its domestic land bank to
benefit from upcoming rail DFC (dedicated freight corridor) and GST reform.
We expect EBITDA CAGR of 15% through FY18 led by 17% in MTO, 15% in CFS and
12% in Project and engineering leading to earnings CAGR of 22%. We value
Allcargo at 14x FY18 EPS to arrive at a fair value of INR243. Initiate coverage with
a Buy.
Leader in LCL market; to benefit from shift in shipping trends
Shareholding pattern (%)
As on
Sep-15 Jun-15 Sep-14
Promoter
69.9
69.9
69.9
DII
0.1
0.0
0.0
FII
6.2
5.9
13.0
Others
23.8
24.2
17.1
FII Includes depository receipts
Domestic economic recovery augurs well for its CFS, P&E businesses
AllCargo, led by acquisitions is now among top two in the world in niche LCL
market with presence in 90 countries. LCL is expected to grow above
industry average led by shift in global business dynamics.
Allcargo MTO volumes are expected to grow above industry average and
improve margins led by (a) efforts to improve volume per container filled
factor to boost margins and (b) negotiating better rates with shippers (scale
helps!), an advantage over competitors to attract volumes.
We expect LCL margins to remain 200-300bps above FCL's 3-3.5% and model
Allcargo's volume CAGR at 9% through FY18 and EBIT margin improvement
from 4% in FY15 to 5% by FY18.
We expect an uptick in CFS/ICD (7% of revenue, 25% of EBITDA), operating
at 65% utilization with improving port volumes and containerization trend.
We expect P&E segment (7% of revenue, 33% of EBITDA), which includes
cranes, project logistics and shipping to grow with higher infrastructure
activity in India through higher utilization.
We model EBIT CAGR (FY15-18) of 13% in CFS/ICD and 18% in P&E.
With current net debt/equity of ~0.3x and likely FCF of ~INR13b till FY18 (v/s
MCap of INR46b, gross block of INR20b), AGLL is well positioned to play to
its strengths of value accretive acquisitions and invest in allied businesses.
We expect it to (a) increase its hold on global LCL business through
opportunistic acquisitions, (b) invest in DFC and GST led opportunities.
We believe that Allcargo Logistics through its superior size and global
presence has created an effective economic moat versus its competitors.
We value Allcargo Logistics at 14x FY18E EPS, and arrive at a target price of
INR243. Initiate coverage with a 'Buy'. The stock trades at 10.6x FY18EPS.
Well positioned to invest growing FCF in value accretive opportunities
Valuation and view
Please click here for Video Link
12 January 2016
3

Allcargo Logistics
Stock Performance (1-year)
LCL leader; to benefit with shift in shipping trends
Global presence, focus on improving fill factor to drive margins
Allcargo, led by acquisitions is now present in 90 countries and is one of the leaders in
niche recession proof LCL segment (~10% of industry). LCL is expected to grow above
industry average led by shift in global business practices to just-in-time, shorter
turnaround from factory to end consumers, ecommerce and high air transport costs.
Allcargo, through concentrated efforts is focusing on (a) improving container fill factor
to drive margin growth and (b) negotiating better rates (scale helps!) with shippers to
negotiate better rates, an advantage over competitors to attract volumes.
We expect LCL margins to remain 200-300bps above FCL’s 3-3.5% and model Allcargo’s
volume CAGR at 9% through FY18 and EBIT margin improvement from 4% in FY15 to
4.6% by FY18.
Leadership position in LCL segment built on acquisitions
Presence in all the key markets and at origination and terminating destination is a
critical factor for global logistics player. Allcargo, within a short period of time, has
achieved a much necessary global scale in the LCL consolidation industry with
presence in 90 countries and ~200 offices, primarily led by acquisitions in US, Europe
and Asia. Allcargo is now amongst the top 2 neutral (third party) LCL consolidators in
the world.
LCL consolidation industry is a niche sub-segment of the global shipping industry and
contributes 10-15% (estimate based on industry interactions and Datamyne
estimates) of the total container volumes transported through ocean.
Exhibit 1: MTO segment revenues grew at 21% CAGR since CY06 driven by contribution
from acquired entities (INR b)
Domestic
Fully
acquired
ECU Line,
acquired
Hindustan
Cargo
21
-
17
1
3
CY08
Hindustan Cargo
Ecu-Line
Acquired
controlling
stakes in
HK based
NVOCCs
34
-
28
3
3
FY12
(15M)
FCL Marine
Econocaribe
Total
Acquired
Econocaribe
and 75% stake
in FCL Marine
47
41
32
-
26
3
3
FY13
5
3
28
3
3
FY14
9
2
29
3
4
FY15
8
-
7
2
CY06
15
-
12
2
CY07
17
-
14
1
2
CY09
22
-
18
2
2
CY10
Source: Company, MOSL
Strategic acquisitions boosted growth and gave scale:
While Allcargo commenced
LCL business in 1995, the big boost to its owned network came in 2005/06 when it
acquired Belgium based ECU-Line (Ecu-line then had 100 offices in 56 countries and
agent network in 120 countries). Its other acquisitions include 2 Hong Kong based
NVOCC’s in 2010, US based LCL operator Econocaribe in 2013 and majority stake
(75%) in Netherlands based FCL Marine in 2013.
12 January 2016
4

Allcargo Logistics
Allcargo’ first major LCL space acquisition was in 2005 when it acquired a 33.8%
stake in ECU-Line followed by purchase of remaining stake in 2006 leading to a
total enterprise value of ~€50m. At the time of acquisition ECU-Line had 4.3x
Allcargo revenue and acquisition catapulted Allcargo to the top 2 LCL player with
other being US based Vanguard.
Econocaribe (deal value of ~USD50m; was then agent of ECU-Line and among
top 3 LCL consolidators in US) strengthened Allcargo position in US with its then
nine offices and 22 container freight terminals in the US and Canada.
FCL Marine is a niche player operating FCL player primarily operating to and fro
Europe and US/Canada.
Exhibit 2: Regional MTO business revenue share (in %) - Share of America geography
improved rapidly helped by recent acquisitions
India
6
37
3
21
18
2
13
2009
Africa
5
35
2
23
18
3
14
2010
America
5
32
2
26
17
3
16
2012
Far East
ANZ
5
29
3
25
19
3
16
2013
Europe
4
30
3
24
24
2
13
2014
Mediterranean
6
30
3
19
29
0
12
2015
Source: Company, MOSL
Exhibit 3: Acquisition led growth strategy as positioned Allcargo among Top 2 LCL operators
1995
1998
2001
2002
2005
•Entered
into LCL consolidation as agent of ECU Line
•Obtained
MTO license from the Ministry of Shipping Government of India in June 1998
•Made
strategic investments in Ecu Line Mauritius and Ecu Line Middle East (Dubai).
•Acquired
50% stake in ACM Lines (Pty) Ltd.
•In
June2005, acquired 33.8% stake in ECU Line
•In
January, increased its stake in ECU Line to 49.9% with an option to increase the stake further
•In
June, acquired the remainder of ECU Line
•In
December, acquired Hindustan Cargo Limited, the freight forwarding arm of Thomas Cook
•Acquired
two Hong Kong based companies engaged in Non Vessel Owning Common Carrier (NVOCC) business in China
•Acquired
US Based Company Econocaribe consolidators
•Acquired
75% stake in Netherlands based logistics company FCL Marine Agencies Rotterdam through ECU-LINE
Source: Company, MOSL
2006
2010
2013
12 January 2016
5

Allcargo Logistics
Exhibit 4: ECU-Line geographical presence (highlighted in blue)
Source: Company, MOSL
Global scale is a win-win for all in value chain?
LCL players like Allcargo book the
container berths with the shipping companies on a regular basis and in turn resell
the space in smaller quantity (less than container load) to the consumers at higher
rates. This is a win-win for both as consumers save the cost of hiring the full
container and LCL player is able to resell the space at favorable rates.
Allcargo’s advantage over other operators is that while Allcargo has global presence,
other operators cannot expand on the same scale. If local players want to expand
abroad they will need to do so via agents which then begin to eat away at the
margins of the business, making it unattractive. Due to its global presence Allcargo
can offer more and more direct trade lanes. This greatly reduces operational risk to
not only Allcargo but also its customers.
Global scale gives an edge to (a) negotiate better rates with the shipping companies,
(b) be cost competitive versus competition to attract more volumes and (c) not shy
away from business even if there is margin imbalance.
a) Ability to book large container volume with shipping companies gives Allcargo
an advantage to negotiate better rates with the shipping companies.
b) Lower rates by the shippers helps Allcargo to offer better rates to its customers
versus competition thereby attracting more volumes.
c) Network reach with offices in both origination and destination is one of the key
competitive advantages in the LCL business as LCL operator will have control on
the cargo at both ends and also secure business even if there is margin
imbalance* between the destinations.
*If container margin on a trade lane from “A to B” is better than from a trade
lane from “B to A”, then the LCL operator with offices at both ends will have an
advantage over an operator with agent network (LCL operator at origin with
agent network will try to avoid business from “B to A”).
12 January 2016
6

Allcargo Logistics
What is LCL and dynamics of LCL
What is LCL?
LCL stands for ‘less than container load’ and LCL service provider is a
cargo consolidator. Customers who do not have a cargo which can fill the container
fully opt for the services of LCL consolidator like Allcargo.
Allcargo is a LCL service provider and acts as a conduit between a shipping line and
its customers which primarily include Customs House Agents (CHAs), freight
forwarders, importers and exporters.
The Importance of LCL is increasing with the changing business practices like just-in-
time, low inventories, emergence of e-commerce etc which require frequent but
smaller shipments of cargo. LCL is also largely immune to economic recessions.
Further, shipping lines do not offer LCL services usually and these services are
handled by consolidators like ECU-Line (Allcargo).
Where does LCL stand in overall shipping business?
A customer who wants to transport container can either contact the shipping line
(Eg. Maersk, CMA, Hapag Lloyd ) directly or can use the services of the third party
freight forwarders (Eg. DHL, Panalpina, CH Robinson), who primarily deal in FCL (full
container load). Shipping lines can entertain customer directly too if the customer is
large in size.
The third party freight forwards are also called as NVOCCs (Non-vessel operating
common carriers) and these can be further divided into LCL and FCL NVOCC’s.
LCL stands for less than container load
FCL stands for full container load
Exhibit 5: The LCL Consolidation process
How big is the LCL market?
Globally, the LCL segment accounts for 10-15% of the total revenue generated by
forwarders, the remaining 85-90% is by FCL. LCL revenues stand at USD10-12b
(CY14), with an annual volume of 2.3 million TEUs. (twenty Feet Equivalent).
Niche opportunity:
LCL is a niche sub-segment within the shipping business and in
our view freight forwarders do not do LCL themselves as (a) it is a more tedious
process, involving interaction with a minimum of 10 entities per container and (b)
low scale versus FCL business.
Competitive scenario:
Top three (Allcargo, Vanguard and Shipco) LCL consolidators
contribute to about 40% of the neutral global LCL market. Other LCL operators in
India include Team Global and LCL Logistics.
Source: Company, MOSL
12 January 2016
7

Allcargo Logistics
LCL is expected to grow above industry average led by shift in global business
practices to just-in-time, shorter factory-to-fork time, ecommerce and high air
transport costs.
Sticky volumes:
LCL volumes tend to be sticky and are more immune to slowdown in
the overall container market. During economic recessions, a large part of FCL
volumes gets converted into LCL volumes.
LCL margins higher than FCL:
Allcargo realizations are typically cost plus basis, i.e.
the shipping freight is a pass-through and Allcargo charges 28-30% margin above it.
LCL offers margins up to 200-300 basis points higher than FCL.
Exhibit 6: Allcargo EBIT margin higher than other global FCL players
DHL
6.0%
4.5%
3.0%
1.5%
0.0%
2011
*Ocean segment EBIT margins
2012
2013
2014
Source: Industry, MOSL
Kuehne + Nagel
CEVA
Sinotrans
Allcargo
Evolving market dynamics to keep LCL volume growth high
Can Allcargo enter into FCL in a big way?
Allcargo focus on the LCL business is driven by the shipping market dynamics,
wherein it is already dominated by the large established companies. To gain a
foothold in a market dominated by such heavyweights would be an arduous
task, in our view.
While Allcargo too does FCL in a small way, but it is not its core business and is
done only on a case-to-case business as per requirement of its clients. 30% of
LCL volume for Allcargo comes from these big freight forwarders. However, the
company has realized that given its LCL network, it can selectively offer FCL
services to its existing and prospective clients without adding any major indirect
costs.
If Allcargo goes into a pure-play freight forwarding (FCL + LCL) then it will be
competing against its customers which are much bigger than Allcargo. It will also
be forced to offer the entire supply-chain solutions the likes of which are
offered by DHL and other players.
We model Allcargo’s MTO volume CAGR at 9% in FY15-18E driven by underlying
business dynamics and EBIT margin improvement from 4% to 4.6% helped by
superior negotiating with shippers, higher use technology in planning and improving
fill factor.
We model MTO volume growth at 9%
12 January 2016
8

Allcargo Logistics
Model high single digit organic volume growth:
While majority of the historical
growth in the MTO business is through acquisitions, the evolving global business
dynamics offer double digit volume growth possibility through organic growth too.
However, in order to further strengthen its market shares in some geographies like
US, China, Brazil and Africa, Allcargo can do further acquisitions in the MTO space in
our view. Focus could be also in strengthening its position in the countries where it
has presence but has room to improve its market share.
Exhibit 7: Model MTO volumes to grow at 9% CAGR
MTO volume ('000 teu)
19%
14%
6%
-9%
200
CY09
238
CY10
337
FY12 -
15M
285
FY13
335
FY14
18%
8%
9%
497
9%
542
26%
YoY (%)
422
456
FY15
FY16E
FY17E
FY18E
Source: Company, MOSL
Exhibit 8: Conservatively model marginal improvement in EBIT margin
EBIT (INRm)
4.5%
3.4%
4.9%
4.6%
3.8%
EBIT margin (%)
4.0%
4.1%
2,118
4.2%
2,435
4.6%
2,883
1,669
576
CY09
1,003
CY10
FY12 -
15M
1,484
1,558
1,896
FY13
FY14
FY15
FY16E
FY17E
FY18E
Source: Company, MOSL
12 January 2016
9

Allcargo Logistics
Domestic economic recovery augurs well for CFS/P&E
Steady growth led by port volumes and strong alliances with shipping lines
CFS/ICD business (7% of revenue, 25% of EBITDA) currently operating at 51%
utilization will see an uptick with improving port volumes and containerization trend.
We expect P&E segment (7% of revenue, 33% of EBITDA), which includes cranes,
project logistics and shipping to grow with higher infrastructure activity in India
through higher utilization. Switching to an asset light model in the P&E segment will
improve return ratios
We expect EBIT CAGR (FY15-18) of 13% in CFS/ICD and 18% in P&E.
Allcargo operates a total of 4 CFS (three locations - JNPT, Chennai and Mundra) and
2 ICDs (Pithampur and Dadri). The company has also started developing another CFS
at Kolkata which is expected to start operations in FY17. We expect Allcargo’s CFS
business to benefit from (a) Macro trends – Port volume growth and increasing
containerization, (b) its relationship with the shipping companies on account of MTO
business and (c) strategic location and (d) favorable EXIM mix. We model volume
growth at 8% CAGR through FY18 and EBITDA margin at 38.8%.
Exhibit 9: We model CFS volumes to grow at 8% CAGR from FY15-18
CFS volume ('000 teu)
60%
46%
227
174
275
285
64%
57%
44%
250
292
CFS utilization (%)
55%
317
60%
343
65%
371
Higher utilization of CFS capacity will drive volumes in FY15-18E
51%
CY09
CY10
FY12 -
15M
FY13
FY14
FY15
FY16E
FY17E
FY18E
Source: Company, MOSL
Macros supportive for strong growth ahead:
Container volume in India is
expected to be 2x by 2020, driven by EXIM trade and an increase in
containerization from the current 55% to >65% (versus developed countries’
average of 70%). The containerization growth will be driven by:
1. Growth in the typical containerized cargo like electronics, textiles, food
products, pharmaceuticals, machinery and paper, and other break-bulk
commodities like steel, cement, sugar and rice.
2. Availability of rail transit capacity post DFCs commissioning, expansion in the
container handling capacity at ports, CFCs, ICDs and inland waterways.
3. Multi-modal logistics park development.
12 January 2016
10

Allcargo Logistics
Exhibit 10: Increasing EXIM trade and containerization to keep container volume growth at ports healthy
Cargo traffic (mmt)
600
450
300
150
0
CAGR
(%)
1971-80: 3.8
1981-90: 7.0
1991-00: 6.7
2001-15: 5.3
Container traffic (mmt)
160
CAGR
(%)
1992-00: 17.5
2000-15: 9.8
120
80
40
0
Source: IPA, Industry, MOSL
Leveraging relationships in the LCL segment:
Indian CFS business while
competitive led by large number of players at each port location, the operators
who can ensure higher utilization will continue to benefit more. Typically,
majority of the CFS are located within the 10-20km from the port thereby
making it difficult to differentiate for the CFS operators to differentiate. We
believe, Allcargo’s large LCL business gives it an advantage as it can leverage its
relationships with shipping companies to attract more volumes.
CFS locations strategic:
Allcargo’s CFS presence in three ports is strategic in our
view as these ports handle 76% (FY15) of the India’s container volume. Further,
current utilization levels leave ample space for future volume growth. Even at
JNPT, given that it has utilized just 50% of the 2
nd
CFS land, it is geared to benefit
for the planned doubling of the JNPT port capacity.
Exhibit 11: Allcargo CFS strategically located
Area (acres)
CFS
JNPT - 1
24
Capacity (teu)
144,000
144,000
77,000
120,000
52,000
36,000
Details
JNPT port handles 39% of India's container traffic
Mundra handles 24% of India’s container traffic
Chennai handles 4% of India’s container traffic
JNPT - 2
43 (25 developed)
Mundra
16
Chennai
25
ICD
Dadri
11
Pithampur
14
Landbank (undeveloped)
Nagpur
63
Hyderabad
40
Bangalore
110
Total
346
573,000
Source: Company, MOSL
EXIM mix and dwell time critical to ensure higher profitability:
We understand
~50% of the CFS revenue come from the ground rental linked to dwell time
(number of days container stored in the CFS). Typically, earnings from import
containers are more than export and Allcargo’s relationships with shipping
companies helps it to keep this ratio favorable. However, on the dwell time
front with improving infrastructure it has reduced from 12-13 days five years
11
12 January 2016

Allcargo Logistics
back to ~10 days now and we expect it to reduce further. The company is using
modern equipment at its CFS in the form of RTGs (Rubber-tire Gantry) replacing
the older reach stackers, leading to better turnaround time.
Exhibit 12: Listed player CFS EBITDA comparison: Allcargo profitability better than its peers
Allcargo
6,000
5,000
4,000
3,000
2,000
FY12
FY13
FY14
FY15
Source: Company, MOSL
GDPL
Navkar
Expect infra spend pick-up to drive P&E and contract logistics segment
Allcargo’s Project and Engineering (P&E) division comprises of (a) Crane leasing, (b)
project cargo transportation and (c) shipping. All these businesses are heavily
correlated with the domestic economic growth and investment cycle.
Allcargo’s P&E division post the heavy capex on the crane business was caught in the
downturn before resurrecting in the last two years. While the return ratios in this
business are subdued, going forward are expected to improve as the company plans
to adopt asset light model (will lease cranes instead of outright purchase).
Exhibit 13: Infrastructure related sectors contribute highest to the P&E segment revenue
Oil & Gas, 16%
Power, 32%
Eng. & Infra, 9%
Logistics, 7%
Cement & Metals,
6%
Others, 25%
Port & CFS, 5%
Source: Company, MOSL
12 January 2016
12

Allcargo Logistics
Exhibit 14: P&E revenue growth lagged increase in capital employed led by slowdown in
the domestic economy
P&E Capital Employed (INRm)
1,053
579
105
184
574
745
409
135
P&E EBIT (INRm)
1,146
CY07
1,342
CY08
2,488
CY09
3,611
CY10
10,672
FY12 (15M)
10,660
FY13
9,762
FY14
9,014
FY15
Source: Company, MOSL
Exhibit 15: Snapshot of P&E and contract logistics businesses and business drivers
Sub-segments
Crane leasing
Details
Owns 140 cranes with total capacity
of 25,000 tonnes ranging from 45
tonnes - 750 tonnes
Owns 5 ships with an average
capacity of 8000 deadweight
tonnes, one has been chartered
Key drivers
Way forward
Investments in mega projects, Plans to lease instead of outright
wind power, etc.
purchase
Sagarmala Project, increase in Secure long-term
capacity of existing ports and increase margins
investment in new ports
Increase fleet size
contracts
and
Shipping
Project Cargo transport
Owns ~200 axles, 20 prime movers
INR 700mn Investments in infra, Plans to enter e-logistics, increase
particularly in power generation, asset utilisation and secure longer
cement and energy
term contracts
GST bill, Dedicated Freight
Introduce
Corridors, Make in India, FDI in
solutions
retail and marketing
Contract Logistics
Manage supply chains of customers
and work on projects using owned
logistics assets and in-house
management capabilities
innovative
logistics
Source: Company, MOSL
Cranes: Economic revival, wind energy investments to drive growth
Demand for cranes is expected to increase with economic revival and investments in
wind farms. Based on the industry interaction and peer comparison, we believe the
crane leasing margins can be >50% and would be one of the highest in Allcargo’s
P&E segment.
However, going forward as the company moves to a more asset light model by
leasing cranes rather than purchasing them, reported margins could be lower but
will improve overall returns. With the utilization rates already above 90%, further
growth will be driven by increased pricing power.
Coastal shipping focus to help the company post healthy returns
The government plans has targeted that by 2020, coastal shipping will account for
10% of the transportation from the current 7%. It has announced various projects
and financial incentives. These will directly lead to the growth of the coastal
shipping business. AllCargo is steadily increasing its fleet size (FY15 revenues at
~INR750m) to create barriers to entry and also plans to aggressively expand coastal
shipping.
12 January 2016
13

Allcargo Logistics
Project Cargo being driven by increase in infra spending
The segment growth is primarily driven by infrastructure spending and investment
in large scale projects. With government’s plan to significantly boost power
generation, cement and energy sectors in India, project cargo business is expected
to grow favorably.
Exhibit 16: Transport modal mix in India in comparison to other countries
Rail
1
8
Road
1
46
60
30
31
India
48
23
China
US
Water
Air
1
14
37
1
43
46
10
Europe
Source: KPMG, MOSL
Other segments: Contract Logistics (3PL) expected to grow post GST and
DFC
Contract logistics revenue contribution was negligible (compared to Allcargo overall
revenues) at ~INR120m in FY15, however we believe has a potential to grow
substantially driven by e-commerce, GST and DFC (dedicated freight corridor) led
opportunities. We believe the growth would be both organic as well as inorganic;
however timelines and opportunity size will emerge over the medium term.
12 January 2016
14

Allcargo Logistics
Expect large FCF deployment to be RoE accretive
Expect AGLL to invest on DFC and GST led opportunities
With current net debt/equity of ~0.3x and likely FCF of INR13b till FY18 (v/s MCap of
~INR46b, gross block of INR20b), AGLL is well positioned to play to its strengths of
value accretive acquisitions and invest in allied businesses.
We expect it to (a) further strengthen its hold on global LCL business through
opportunistic acquisitions, (b) invest in DFC and GST led opportunities.
Prudent balance sheet, high FCF creates opportunities
AGLL management has strong investment track record:
Allcargo has made more
than 8 acquisitions in the last 10 years primarily in the MTO space and has invested
significantly in the domestic CFS and P&E segment. These acquisition and
investments has helped AGLL to grow revenue, EBITDA and PAT at 26%/25%/19%
respectively. While the acquisitions has led to accretion of goodwill (INR8.7b) and
depressed RoE’s (ex-goodwill reported FY15 RoE improves from 13% to 24%), but
nevertheless its book value (adjusted for goodwill) has grown at 15% CAGR in the
last 8 years.
Exhibit 17: AGLL revenue/EBITDA/PAT grew at
26%/25%/19% since CY06
EBITDA (INRb)
PAT (INRb)
5.2
3.6
2.2
0.8
1.4
0.8
1.1
2.2
1.3
2.7
1.7
2.8
1.7
1.5
39
27
4.0
2.4
42
55
27
39
114
79
91
59
64
78
126
89
4.8
Exhibit 18: Book value CAGR at 15% impressive despite
acquisition led goodwill accretion
Reported Book value (INR/sh)
Bookvalue adjusted for goodwill (INR/sh)
142
151
70
83
0.6
CY06 CY07 CY08 CY09 CY10
FY12 FY13
(15M)
FY14
FY15
CY06 CY07 CY08 CY09 CY10 FY12 FY13 FY14 FY15
(15M)
Source: Company, MOSL
Large FCF – Increase dividend or invest aggressively?
While, there is a room to improve dividend payout (currently at 12.5% on
consolidated basis), we expect AGLL management to play to its strengths and opt for
more investment in the core and allied businesses.
Based on our AGLL’s capex understanding in the current businesses, we expect AGLL
to generate FCF of INR13b till FY18 (v/s MCap of INR46b, gross block of INR20b).
Further, its prudent net debt/equity of 0.3x (FY15 basis) gives room to raise debt if
any large investment opportunity comes up.
12 January 2016
15

Allcargo Logistics
Exhibit 20: Expect AGLL to generate cumulative FCF of INR13b by FY18 (INR b)
3.9
1.3
0.2
3.9
4.5
5.1
(1.2)
CY09
(2.5)
CY10
(2.5)
FY12
(15M)
FY13
FY14
FY15
FY16E
FY17E
FY18E
Source: Company, MOSL
Exhibit 21: AGLL to turn net cash based on current
maintenance apex plans
Net Debt / (Cash) (INRb)
8
6
4
1
Exhibit 22: Already prudent balance sheet position to
strengthen further
Net Debt/Equity (x)
0.5
0.1
0.2
0.4
0.5
0.3
0.1
-0.1
-0.2
6
1
2
-3
CY09 CY10 FY12 FY13
(15M)
FY14
-7
FY15 FY16E FY17E FY18E
Source: Company, MOSL
CY09 CY10 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
(15M)
Source: Company, MOSL
Expect AGLL management to pursue shareholder value accretive opportunities
We expect AGLL management to (a) further strengthen its hold on global LCL
business through opportunistic acquisitions, (b) invest in DFC and GST led
opportunities. Of its three business segments, we expect further investments in its
MTO and P&E segment as current CFS utilization leaves large scope of growth
without any capex requirement.
Exhibit 23: Analyzing investment opportunities
Cash deployment avenues
Increase dividend
CFS
MTO
Crane leasing
Coastal shipping
DFC, GCT led opportunities
Our view
While dividend payout can be increased marginally, AGLL shareholders could benefit more by investing
in new businesses given the management's investment track record
Given the current utilization levels, no need to commit further capex in CFS in the medium term
Focus on strengthening position in countries with high potential and where consolidation will be value
accretive
Changed business dynamics now make cranes available for leasing, so expect AGLL to sub-lease cranes
rather than outright purchase, thereby boosting return ratios
Large opportunity given government focus - can selectively add more ships
Recent senior management induction of Mr. Tulsiani could help in developing this business segment.
Can explore opportunities to develop its landbank (213 acres at Nagpur, Bangalore and Hyderabad) or
add more to pursue logistics parks opportunities or develop its contract logistics opportunities.
Source: MOSL
12 January 2016
16

Allcargo Logistics
Valuation and view
Initiate coverage with Buy
We believe that Allcargo Logistics through its superior size and global presence
via ECU Line has established an effective competitive advantage versus its
competitors.
It is therefore well placed to tackle both any sluggishness in container business
as well as make good use of the opportunities in this space.
We estimate EBITDA/PAT CAGR of 15%/23% through FY15-18E and return ratios
are expected to improve from ~13% to 17%-19% driven by improvement in
margins and reduction in capex intensity in the business.
Due to strong EBITDA/PAT growth driven by (a) consistent increase in volumes
and (b) increase in margins, we assign a PE multiple of 14x to Allcargo.
Our target PE is in line with the last ~10 year average PE; we expect 22%
earnings growth through FY18 v/s ~18% earnings growth since CY06 to FY15.
Based on our implied FY17 PE of 17.0x, AGLL is relatively undervalued by ~26%
when compared to Navkar and ~33% when compared to GDPL (adj.)
We value Allcargo Logistics at 14x FY18E EPS, and arrive at a target price of
INR243. Initiate coverage with a 'Buy'. The stock trades at 10.6x FY18EPS.
Exhibit 24: On an EBITDA basis, AGLL currently trades at a
~10% premium to its historical average
11.2
8.9
6.6
6.3
6.9
EV/EBITDA(x)
Avg(x)
Exhibit 23: AGLL currently trades at a 5% discount to its 10
years average P/E
50
40
30
20
13.7
10
9.9
0
13.2
P/E (x)
5 Yrs Avg(x)
10 Yrs Avg(x)
4.3
2.0
Source: Bloomberg, MOSL
Source: Company, MOSL
Exhibit 24: Allcargo currently trades at a discount to its peers
Company
Allcargo
Concor
Navkar
GDPL*
Gati
Blue Dart
Transport Corp
*(Adj. for 49% JV sh. in Rail)
M Cap
USD M
695
3,668
427
521
200
2,244
327
FY14
5.9
48.4
NA
10.1
NA
51.7
9.8
EPS
P/E (x)
FY15 FY16E FY17E FY15 FY16E
9.5
11.6 31.1 19.3 15.8
54.1 44.9 55.4 23.3 28.1
NA
5.7
8.7
NA
34.8
13.1
9.3
12.5 24.3 34.0
4.7
4.8
6.4
45.9 31.9
54.5 82.6 114.8 133.9 76.5
11.1 13.0 15.5 23.5 22.1
EV/EBITDA (x)
RoE (%)
FY17E FY15 FY16E FY17E FY15 FY16E FY17E
12.9 10.7
8.3
6.8
13.0 14.5 15.6
22.8 15.6 15.6 15.6 14.7 14.7 14.7
23.0
NA
NA
NA
NA
6.9
8.7
25.4 14.5 18.6 13.9 16.4 10.8 13.6
23.9 16.9 12.4
9.9
6.2
7.4
9.2
55.1 78.0 47.2 32.8 27.2 50.3 50.9
18.6 11.4 11.2
9.5
14.6 14.8 15.5
Source: Bloomberg, MOSL
12 January 2016
17

Allcargo Logistics
Key risks
Economic risks:
CFS and MTO businesses are closely linked to the global trade
volumes. Any slowdown in global trade, due to slowdown in global GDP growth
or due to the slowdown in key trade hubs like China, or due to other factors will
impact overall volumes growth.
Currency risks:
The MTO revenues are generated by subsidiaries based outside
India. While preparing the consolidated statements, the earnings are translated
into INR. Any fluctuations in forex will hence impact the financial statements of
the company.
Risk of impairment of goodwill:
Allcargo has reported more than INR8.5bn of
goodwill, due to the number of acquisitions it has done in the past. Any
impairment in the value of this goodwill will negatively impact the financial
statements of the company.
12 January 2016
18

Allcargo Logistics
Company background
Incorporated in 1993 by promoter Shashi Kiran Shetty, Allcargo Logistics (a part
of Avvashya Group) started operations as cargo handler at Mumbai port. Over
the years through organic and inorganic route it has become a leading
integrated logistics service provider with >USD1b in sales and ~883 permanent
employees (as on March 31, 2015). Majority of the company’s workers are
contractual,
Its key business divisions are global Multimodal Transport Operations (NVOCC,
LCL and FCL), domestic CFS/ICD operations and Project and Engineering division
(which includes Project Logistics, Equipment Hiring). It also provides contract
logistics services.
Allcargo, as a multimodal transport operator (MTO) under a single document
provides LCL and FCL forwarding services using multiple transport modes (sea,
road and rail). Its customers include Customs House Agents (CHAs), freight
forwarders, exporters and importers.
It has presence in 90 countries and 4,000 port pairs and operates 6 CFS/ICD in
India. It has yet to develop >200 acres of land banks at Nagpur, Hyderabad and
Bangalore.
Business Verticals
CFS: Container Freight
Station
ICD: Inland Container
Depot
MTO: Multimodal
Transport Operations
NVOCC: Non vessel
operating container carrier
LCL: Less than container
load
FCL: Full container load
12 January 2016
19

Allcargo Logistics
Exhibit 25: KEY MANAGEMENT
Mr. Shashi Kiran Shetty,
Chairman
and
Managing
Director
The promoter and the founder of Allcargo. He has led the growth
of the company from a freight forwarding agent to the world’s
nd
2 largest LCL player with total revenues of INR 56bn. He has
more than 35 years of experience in the industry.
Mr. Adarsh Hedge,
Executive Director
The head of CFS business and corporate marketing of Allcargo.
He has more than 22 years of experience in the logistics industry.
He is a mechanical engineer.
Mr. Umesh Shetty,
CEO – Projects & Engineering
Solutions
Responsible for the growth of Projects & Engineering Solutions
division, Mr. Umesh Shetty has more than 20 years of experience
in cargo and logistics.
Mr. S. Suryanarayanan,
Director Finance & Executive
Director ECU-LINE
He has more than year 22 years of experience in the logistics,
chemicals and engineering sector. He had worked in Reliance
and Great Eastern before joining AllCargo. He is a Chartered
Accountant.
Mr. Prakash Tulsiani,
Executive Director & COO
Having served as the MD of Gujarat Pipavav Port and COO of
Gateway Terminals, Mr. Tulsiani brings with substantial
leadership experience in the ports industry. He has more than
three decades of experience.
Exhibit 26: MTO segment contributes the highest to revenue
Revenue share (%)
9
7
10
7
12
8
MTO
11
8
CFS
8
6
P&E
9
7
Exhibit 27: P&E segment contributes the highest to EBIT
EBIT share (%)
23
38
39
MTO
24
37
39
CFS
13
38
P&E
5
36
20
29
30
41
30
83
77
79
81
85
84
49
59
51
FY15
CY09
CY10
FY12 (15M)
FY13
FY14
FY15
CY09
CY10 FY12 (15M) FY13
FY14
Source: Company, MOSL
12 January 2016
20

Allcargo Logistics
Exhibit 29: Geographical revenue break-up for AGLL (% share)
Mediterranean
5%
India
26%
Europe
25%
Africa
0%
ANZ
2%
America
Far East
25%
16%
Exhibit 30: Allcargo CFS and ICD locations
12 January 2016
21

Allcargo Logistics
Exhibit 31: Key timelines for AllCargo Logistics
Year
1993
1994
1995
1998
2001
2002
2003
2004
2005
2005
2006
2006
2006
2006
2006
2007
2008
2008
2009
2009
2010
2010
In June, acquired 33.8% stake in ECU Line
On December 8, changed company name to Allcargo Global
Logistics Pvt Ltd.
PE firm New Vernon acquired 6.42% in Allcargo for INR600m
(@~3x sales)
In Jan-06, hiked stake in ECU Line to 49.9% with an option to
increase further
Listed on BSE and NSE in June
In Jun-06, fully acquired ECU Line. With ECU Line revenues
4.3x of Allcargo, it became the world's No.2 NVOCC LCL firm,
after Vanguard.
In Dec-06, acquired freight forwarding arm (air and custom
clearance) of Thomas Cook - Hindustan Cargo for ~INR89m
In Apr-07 started Chennai and
Mundra CFS
Acquired P&E division of
Transindia Freight
In Feb-08, Blackstone took 10.38% stake through equity shares, FCCDs and warrants for ~INR2.4b (valued AllCargo at INR23b, 30%
premium to then share price)
In Sept-09, Blackstone increases stake to 14.99% by converting warrants.
Started 1st ICD at Pithampur
Started operations in 3PL
In April, raised USD23.5m via QIP
Acquired Hong Kong based NVOCC's for USD22m (operating
profit of USD3.6m): (1) 75% stake in Shanghai based and (b)
100% stake for Ningbo based.
Started ICD at Dadri in JV with
Concor
Started 2nd CFS at JNPT port
Through ECU Line acquired US based Econocaribe consolidators
for ~USD50m
Through ECU Line acquired 75% stake in Netherlands based FCL
Marine
Source: Company, MOSL
In Apr-11, acquired MHTC
Logistics
MTO
CFS
P&E and others
Incorporated on August 18, 1993 as a private limited company - Allcargo Movers (India) Pvt Ltd. Started as(a) cargo handling
operator at Mumbai port, (b) a shipping agency house and (c) provided freight forwarding services
Appointed as agents of ASIA Lines Ltd. a Mauritian Shipping
Line
Entered into LCL consolidation as agent of ECU Line in
Mumbai and Delhi
Obtained MTO licence from the Government of India in June
1998
Made strategic investments in ECU Line - Mauritius and
Middle East (Dubai).
Acquired 50% stake in ACM Lines (Pty) Ltd.
Entered into a JV with Transworld Logistics & Shipping
Services Inc
Started CFS at Kroploi near JNPT
Commissioned 2nd phase of its
JNPT CFS
Commissioned 3rd phase
expansion JNPT CFS
2011
2011
2012
2013
2013
Changed its name to Allcargo Logistics Ltd.
12 January 2016
22

Allcargo Logistics
Financials and valuations
Consolidated – Income Statement
Y/E March
Total Income from Operations
Change (%)
Operational Cost
Personnel Expenses
Other Expenses
Total Expenditure
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT after EO Exp.
Current Tax
Deferred Tax
Tax Rate (%)
Less: Minority Interest
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY12 (15M)
42,804
49.5
28,645
6,095
2,824
37,564
5,240
12.2
1,337
3,903
644
452
3,710
376
358
19.8
132
2,845
2,845
71.5
6.6
0.0
FY12 (15M)
260
14,638
14,899
311
924
7,653
23,788
16,358
3,801
12,557
4,580
854
1,071
9,369
125
3,576
1,341
4,327
4,815
3,338
1,094
383
4,555
171
23,788
FY13
252
15,604
15,857
433
1,172
7,267
24,728
18,850
5,163
13,687
4,602
139
1,859
9,641
111
3,825
1,382
4,324
5,429
3,536
1,275
619
4,212
228
24,728
FY13
39,263
-8.3
27,194
5,634
2,835
35,663
3,600
9.2
1,474
2,127
453
662
2,335
320
192
21.9
126
1,697
1,697
-40.3
4.3
0.0
FY14
48,594
23.8
34,281
7,290
3,065
44,635
3,959
8.1
1,755
2,205
609
365
1,960
277
139
21.2
51
1,493
1,493
-12.0
3.1
0.0
FY14
252
17,679
17,931
463
1,284
9,921
29,599
20,528
7,094
13,434
9,051
236
1,902
11,675
114
5,715
1,647
4,199
6,938
4,661
1,674
602
4,737
238
29,599
FY15
56,288
15.8
39,609
8,566
3,279
51,454
4,834
8.6
1,574
3,260
601
526
3,185
629
71
22.0
73
2,412
2,412
61.5
4.3
0.0
FY15
252
18,826
19,078
221
1,354
6,133
26,786
20,244
8,283
11,961
8,655
302
894
12,648
117
6,476
1,738
4,318
7,928
5,744
1,557
627
4,720
253
26,786
FY16E
61,886
9.9
43,563
9,418
3,679
56,660
5,724
9.2
1,578
4,146
507
227
3,865
-39
3,826
842
22.0
87
2,897
22.0
4.7
0.0
FY16E
504
21,107
21,611
221
1,354
5,133
28,319
20,744
9,861
10,883
8,655
332
894
15,852
128
7,120
3,857
4,747
8,550
6,315
1,712
524
7,302
253
28,319
FY17E
68,256
10.3
48,047
10,388
4,057
62,492
6,422
9.4
1,617
4,805
417
359
4,748
0
4,748
1,045
22.0
105
3,598
22.9
5.3
0.0
FY17E
504
24,254
24,758
221
1,354
4,133
30,466
21,244
11,477
9,767
8,655
367
894
19,989
142
7,852
6,759
5,236
9,458
6,965
1,888
605
10,531
253
30,466
(INR Million)
FY18E
74,880
9.7
52,710
11,396
4,451
68,557
7,268
9.7
1,655
5,612
327
490
5,775
0
5,775
1,271
22.0
126
4,379
21.7
5.8
0.0
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Deferred Liabilities
Total Loans
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Goodwill on Consolidation
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Deferred Tax assets
Appl. of Funds
(INR Million)
FY18E
504
28,083
28,588
221
1,354
3,133
33,296
21,744
13,132
8,612
8,655
402
894
24,891
155
8,615
10,377
5,744
10,411
7,641
2,071
699
14,480
253
33,296
12 January 2016
23

Allcargo Logistics
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
Working Capital Ratios
Debtor (Days)
Creditor (Days)
Working Cap. Turnover (Days)
Leverage Ratio (x)
Net Debt/Equity (x)
0.5
0.4
0.5
0.3
0.1
-0.1
-0.2
30
43
27
36
47
26
43
50
23
42
53
19
42
53
20
42
53
20
42
53
20
17.0
17.3
11.0
11.5
8.8
9.5
13.0
13.4
14.4
15.9
15.5
17.6
16.4
19.1
19.3
11.7
2.4
0.9
10.7
0.5
15.8
10.3
2.1
0.8
8.3
0.7
12.9
8.9
1.9
0.6
6.8
0.8
10.6
7.7
1.6
0.5
5.4
1.0
11.3
16.6
59.1
0.8
8.0
6.7
12.6
62.9
0.7
13.0
5.9
12.9
71.1
0.8
14.8
9.5
15.8
75.7
1.0
12.5
11.6
17.9
85.7
1.2
12.5
14.3
20.7
98.2
1.5
12.5
17.4
23.9
113.4
1.8
12.5
FY12 (15M)
FY13
FY14
FY15
FY16E
FY17E
FY18E
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(inc)/dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
(Inc)/Dec in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
12 January 2016
FY12 (15M)
3,710
1,337
551
-930
-1,353
3,315
153
3,468
-5,991
-2,524
1,014
-414
-5,391
0
3,009
-556
-530
-90
1,834
-89
1,430
1,341
FY13
2,335
1,474
370
-634
-22
3,522
-278
3,244
-1,896
1,348
52
88
-1,757
0
-563
-538
-74
-271
-1,446
41
1,341
1,382
FY14
1,960
1,755
532
-373
-195
3,680
-572
3,107
-1,290
1,817
-237
-2,665
-4,192
0
2,732
-586
-222
-575
1,350
265
1,382
1,647
FY15
3,171
1,574
492
-478
113
4,872
-573
4,300
-442
3,858
1,218
-1,028
-252
0
-2,509
-550
-310
-589
-3,957
91
1,647
1,738
FY16E
3,826
1,578
280
-842
-462
4,380
0
4,380
-530
3,850
0
227
-303
0
-1,000
-507
-363
-87
-1,958
2,119
1,738
3,857
FY17E
4,748
1,617
58
-1,045
-327
5,050
0
5,050
-534
4,516
0
359
-175
0
-1,000
-417
-451
-105
-1,973
2,902
3,857
6,759
(INR Million)
FY18E
5,775
1,655
-163
-1,271
-331
5,666
0
5,666
-536
5,131
0
490
-46
0
-1,000
-327
-549
-126
-2,002
3,618
6,759
10,377
24

REPORT GALLERY
RECENT INITIATING COVERAGE REPORTS

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