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March 29, 2008| Logistics

Initiating coverage
Current price Target price
Allcargo Global Logistics (ALLGLO) Rs 840 Rs 934
Potential upside Time Frame
11% 12 months
Emerging global cargo consolidator …
PERFORMER
Allcargo Global Logistics is a leading logistics service provider involved in
MTO (multimodal transport operations), CFS (container freight stations) Analyst’s Name
and handling of project cargo. The company plans to capitalise on India’s
fast-growing international trade by expanding its freight services through Siddhartha Khemka
siddhartha.khemka@icicidirect.com
multiple modes of transport. We expect a 13.67% CAGR in consolidated
revenues and 29.39% CAGR in net profit over CY07-09E.

ƒ World’s second largest MTO


Allcargo is India’s largest MTO. It also became the world’s second largest Sales & EPS trend
NVOCC (Non Vessel Operating Common Carrier) by acquiring Belgium- 2500 60
50
based ECU Line in June 2006. The acquisition complements Allcargo’s MTO 2000
40
business and enables it to leverage ECU Line’s network to service clients 1500

Rs .
Rs cr
30
across the world. 1000
20
500 10

ƒ Expanding CFS/ICD operations to create a pan-India network 0 0


FY06 9MCY06 CY07 CY08E CY09E
The company has an established CFS at JNPT, besides two new CFS at Net Sales (Rs cr) (LHS) EPS (Rs) (RHS)
Chennai and Mundra. It has entered into a JV with Concor to set up an ICD
(inland container depot) at Dadri, Greater Noida, to be operational by Jan Stock metrics
2009. It is also planning to set up ICDs at Indore, Nagpur, Hyderabad, Bloomberg code AGLL.IN
Ahmedabad and Bangalore at a capex of Rs 250-Rs 300 crore. Reuters code ALGL.BO
Face Value Rs 10
ƒ Deal with Blackstone to fund capex Promoters holding 79.60%
In order to fund its expansion, it has entered into a stake sale deal with Market Cap Rs 1,791 crore
Blackstone Group LP, a global private equity fund. Allcargo will dilute 52 Week H/L 1095 / 610
10.39% of its equity in a mix of warrants and fully & compulsorily convertible Sensex 16,015
debentures. Average volume 60,742

Valuations Comparative return metrics


At the current price of Rs 840, the stock is trading at 20.83x it CY08E Stock return 3M 6M 12M
consolidated earnings (EPS) of Rs 40.33 and 17.50x its CY09E EPS of Rs Allcargo Global -6% -7% -23%
47.99. On an EV/EBIDTA basis, the stock is available at 10.80x CY08E TCI -45% -32% 42%
earnings and 8.36x CY09E earnings. Though we are upbeat on the future Gateway Distriparks -34% -30% -27%
prospects of the company, we believe current valuations have already Aegis Logistics -40% 18% 66%
factored in near-term growth opportunities. We estimate the company’s
CY08 EBIDTA at Rs 153.72 crore. We arrive at a target price of Rs 934,
valuing the stock at 12x its CY08E earnings on an EV/EBIDTA basis. We rate
the stock a PERFORMER.
Exhibit 1: Key Financials Price trend
Year to Dec 31 9MCY06 CY07 CY08E CY09E 1400
Net Sales (Rs cr) 895.41 1643.05 1901.05 2122.93 Absolute Sell
1300
Adj Net Profit (Rs cr) 60.35 71.61 90.30 119.89 1200
1100
EPS (Rs) 29.75 31.98 40.33 47.99
Share Price (Rs)

1000
Target Price
P/E (x) 28.23 26.26 20.83 17.50 900
Price/Book (x) 4.32 3.87 3.07 2.32 800
EV/EBIDTA (x) 21.75 16.12 10.80 8.36 700

NPM (%) 6.70 4.34 4.75 5.65 600 Absolute Buy


500
RoNW (%) 15.29 14.72 14.76 13.28 400
RoCE (%) 16.29 18.00 16.93 16.18
Feb-07

Apr-07

Feb-08
Jun-06

Aug-06

Oct-06

Dec-06

Jun-07

Aug-07

Oct-07

Dec-07

Source: Company, ICICIdirect Research


ICICIdirect | Equity Research
1|Page
Company Background
Share holding pattern
Allcargo Global Logistics (AGL) is a leading logistics service
Share holder % holding
provider involved in MTO (multimodal transport operations) and
handling of project cargo. It started operations in 1993 as a Promoters 79.60
shipping and freight-forwarding agency. It transitioned to a Institutional investors 12.37
MTO in 1998 by offering logistics services such as consolidation Other investors 3.98
of LCL (less-than-container load) and FCL (full container load) General public 4.05
cargoes for exporters and importers. In 2003, it integrated
forward into CFS operations in order to offer value added Promoter & Institutional holding trend
services to clients. It owns CFS (container freight station) near
the Jawaharlal Nehru Port Trust, Mumbai, and also in Chennai 90 79.6 79.6 79.6 79.6
and Mundra. To strengthen its MTO business globally, Allcargo 80
acquired Belgium-based ECU Line NV in 2006. In January 2007, 70
the company acquired Hindustan Cargo from Thomas Cook to 60
enter the growing airfreight business. 50

(%)
40
30
20 12.6 12.7 12.8 12.4
10
0
Q1CY07 Q2CY07 Q3CY07 Q4CY07
Promoters Institutional investors

Exhibit 2: Business Model

Allcargo Global Logistics

CFS / ICD MTO Infrastructure Support

NVOCC Project Cargo Air Freight

Exports Imports
CFS: Container Freight Station
ICD: Inland Container Depot
LCL LCL MTO: Multimodal Transport Operations
NVOCC: Non vessel owning container carrier
LCL: Less than container load
FCL FCL FCL: Full container load

Source: Company, ICICIdirect Research

2|Page
INVESTMENT RATIONALE

India’s largest multimodal transport operator


Allcargo is India’s largest MTO offering consolidation and freight services for
export and import cargo, utilising multiple modes of transport like sea, road
and rail under a single multimodal transport document. Currently, MTO Allcargo is India’s largest MTO
revenues are dominated by LCL cargo, but the company plans to increase its offering consolidation and
freight services for export and
focus on high-margin FCL cargo as there is no labour cost involved in stuffing
import cargo
and de-stuffing containers at the CFS. (TEU: Twenty-foot equivalent unit,
standard size of a container).

Exhibit 3: Growth in MTO throughput (standalone volumes handled in TEUs)


50000
45000
40000
35000 18818
30000
16223
(TEUs)

25000
Volumes handled by the
13410 domestic MTO business to grow
20000 13509 12077 from 13,410 TEUs in CY07 to
15000 11412 9662
18,818 TEUs in CY09E
9431 24442
10000 19828
15430
12481 11798
5000 7486 9388 10388
0
FY03 FY04 FY05 FY06 9MCY06 CY07 CY08E CY09E
FCL LCL
Source: Company, ICICIdirect Research

World’s second largest NVOCC player


Allcargo acquired ECU Line, the world’s second largest NVOCC based in
Antwerp, Belgium in a phased manner between 2005 and 2006. (NVOCC: Non
Vessel Operating Common Carrier, a freight forwarder that dose not owns a
shipping vessel, but books space on ships and sell it in smaller quantities, The world’s second largest
consolidating freight for transport in standard containers). NVOCC player after acquiring
ECU Line
The ECU acquisition, an all-cash deal for €22.8 million in June 2006, propelled
Allcargo into the world’s second largest NVOCC player. The acquisition is
expected to complement Allcargo’s MTO business as it can leverage ECU
Line’s network to service clients across the world. ECU Lines has more than
120 offices in 60 countries and a franchisee and agent network across 203
locations in 120 countries.

Initiatives to improve ECU Line’s performance


Post the acquisition, Allcargo has retained the management and employees of
ECU Line and has been taking several steps to boost the latter’s margins. ECU
Line has an EBITDA margin of around 4% – 5 % and net margin of around 2%
– 2.5%, which are lower than that of Allcargo’s MTO business, which has
EBIDTA margins of around 7% and net margins of 6%.

However, the MTO business, both domestic and international, is not capital
intensive. This business is working-capital neutral and very little capital
equipment is required. As a result, the return on equity and return on capital
employed are very high.

3|Page
ƒ Tie-up with Econocaribe, US-based NVOCC
Earlier, ECU Line had a tie-up with OTS Logistics for the US-EU corridor.
Allcargo had no presence in the US. In order to increase its presence, it tied up
with Econocaribe to provide services in the US, Latin America and other parts Allcargo has taken several
of the world. Econocaribe is the third largest MTO player in the US. We initiatives to increase ECU
believe, this cooperation will create synergies for both companies in terms of Line’s operational efficiency
wider reach both into and out of US to regions like Europe, Asia and Middle and improve margins
East. This tie-up is likely to increase the volumes handled by ECU and Allcargo.

ƒ Outsourcing of business processes to India


Allcargo has tied-up with WNS in India to outsource back end business
processes and support functions like accounts, budgetary review,
documentation, etc. This process will not only reduce manpower at ECU Line,
but also help reduce the cost of operations. We believe lower cost of support
operations in India would result in huge cost savings for ECU Line over the
next few years.

ƒ Set-up global freight buying office in Hong Kong


The company has set up a global freight buying office in Hong Kong to
centralise the process and gain preferential rates from shipping lines on the
back of higher committed volumes. Allcargo expects to negotiate for better
rates with shipping lines as it will be able to buy at bulk for ECU Line as well as
itself as a group. We expect this to lead to savings of 1% to 1.5% in freight
costs by 2010.

Exhibit 4: Un-audited financials of ECU Line (CY07)


ECU Line’s revenues are 6.8x
Particulars Rs crore
Allcargo’s standalone
Income from Operations 1276.81 revenues of Rs 321.80 crore
Operating Expenses 863.07 for CY07
Staff Cost 231.87
Other Expenditure 127.34
EBIDTA 54.54
Other Income 2.19
Interest 5.02
Depreciation 9.28
Exceptional Items - Depreciation write back 2.96 ECU Line has an EBITDA
Provision for Taxation 12.53 margin of around 4% – 5 %
Profit after Tax 26.95 and net margin at around 2%
Minority Interest 8.37 – 2.5%, lower than Allcargo’s
Adj. Net Profit 18.58 MTO business which has
EBIDTA margins of around
EBIDTA margins (%) 4.27
7% and net margins of 6%
NPM (%) 1.45
Source: Company, ICICIdirect Research

4|Page
CFS at India’s largest container handling port
Allcargo offers integrated logistics and port related support services through
its CFSs. The CFS' main role is to facilitate temporary storage, stuffing and de-
stuffing of containers, Customs clearance of cargo and maintenance of
container units. The two primary revenue streams under this business are
ground rent and handling & storage charges. CFS revenues are driven
primarily by imports; hence shipping lines are the main customers in this
business.

Allcargo has an established CFS at JNPT, India’s largest container port, which
Allcargo has established CFSs
handles almost 60% of the total container traffic. It began operations in April at JNPT, Chennai and Mundra
2003 and currently has a capacity to handle 120,000 TEUs per annum. Besides with a total capacity to handle
JNPT, the company entered new locations in May 2007. It has a CFS at 220,000 TEUs per annum
Chennai and Mundra, each having an annual capacity of handling 50,000 TEUs.

Exhibit 5: Current CFS capacity


Operation Total Area Developed Capacity
Region commenced (acres) area (acres) pa (TEUs)
Mumbai CFS April 2003 19 19 120,000
Chennai CFS (Phase I) May 2007 25 9 50,000
Mundra CFS May 2007 16 9 50,000
Total 60 37 220,000
Source: Company, ICICIdirect Research

Container traffic in India increased at a 14.5% CAGR over FY02-07. Overall


EXIM trade witnessed a 10% CAGR during the same period. Going ahead, the
Indian Port Association (IPA) estimates an 18% CAGR in container cargo from
5.4 million TEUs in FY07 to 12.5 million TEUs in FY12 due to increasing EXIM
volumes, time and cost efficiency of handling containers and increasing
domestic trade. We believe that this growth augurs well for Allcargo, which is
present in the entire logistics value chain for containers.

Exhibit 6: Growth in containerised cargo in India

14

12

10
TEUs in million

16% CAGR Growth in movement of


8 containerised cargo in India to
benefit Allcargo
6

0
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY12E

Source: IPA, ICICIdirect Research

5|Page
Expanding the CFS/ICDs to create a pan-India network
Allcargo plans to create a pan-India network of CFSs and ICDs to tap high
volumes as well as provide better logistic services.

The company has already acquired land at Pithampur (near Indore) and
Bangalore. It has also taken land in Nagpur and Hyderabad on a lease basis,
while it is still looking for a suitable land at Ahmedabad. The Indore ICD would
be the first to be developed and is expected to be operational by July 2008.
The company has also entered into a joint venture with Container Corporation
of India (Concor) to share its ICD at Dadri, Greater Noida. It is also expanding
its CFS at Chennai, by developing the surplus land to increase the capacity
from 50,000 TEUs to 85,000 TEUs.

Exhibit 7: Proposed expansion of the CFS/ ICD network


Total Area Capacity
Location Expected (acres) (TEUs)
Pithampur, Indore July 2008 14 30,000
Chennai Phase II Dec 2008 14 34,000 Aggressive expansion plan to
Dadri, Greater Noida Jan 2009 10 84,000 create a pan-India network of
CFSs and ICDs
Nagpur Dec 2009 45 NA
Hyderabad Dec 2009 30 NA
Ahmedabad Dec 2009 NA NA
Bangalore Dec 2009 12 NA
Source: Company, ICICIdirect Research

The diversification will help Allcargo to cater to the increasing trade from other
ports locations, while reducing its dependence on JNPT. We expect revenues
from CFS / ICD business to show 18.29% CAGR over CY07-09E from Rs 94.28
crore to Rs 131.93 crore. This is on back of the growth is volumes handled
from 142,025 TEUs to 220,600 TEUs in CY09E.

Exhibit 8: Volumes handled by CFS / ICD to see manifold increase


250000

200000

150000
(TEUs)

CFS / ICD revenue to witness a


220,600
100000 18.29% CAGR over CY07-09E
142,025 151,500 on back of increase in volumes
handled
50000 83,214 77,035
57,736
26,466
0
FY04 FY05 FY06 9MCY06 CY07 CY08E CY09E

Source: Company, ICICIdirect Research

6|Page
ƒ JV with Concor to set up ICD at NCR
As part of its expansion plan, Allcargo has entered into a joint venture with ICD at Dadri, Greater Noida to
Concor for setting up an inland container depot (ICD) at Dadri, Greater Noida in be operational by Jan 2009 in
Uttar Pradesh. Allcargo will own 51% of the joint venture, while the rest would joint venture with Concor
be owned by Concor. The facility to be set up on a 10 acre land belonging to
Concor is likely to be operational by Jan 2009 and would have a capacity to
handle 84,000 TEUs pa. The ICD will have a rail sliding connecting it to the
western ports.

ƒ Deal with Blackstone to fund capex


The company has laid out an aggressive growth strategy, entailing an
investment of around Rs 350 – 400 crore over the next few years. In order to
fund its various expansion initiatives, it entered into a stake sale deal with
Blackstone Group LP in March 2008.

Allcargo issued 1,081,081 6% fully & compulsorily convertible debentures


(FCCD), 1,513,514 warrants and 1,000 equity shares. Post conversion, the deal
which is linked to the company’s performance, is likely to fetch Rs 242.43 crore
to Rs 295.40 crore. The conversion into the same number of shares will be
done on completion of 18 months from the date of issue.

Apart from the capex (Rs 250 – 300 crore) for expanding its CFS and ICD
business, Allcargo plans to invest up to Rs 100 crore for the purchase of
cranes under TansIndia, its newly acquired infrastructure equipment handling
business.

Exhibit 9: Blackstone deal structure


Number of Conversion Price Total Amount
Instrument shares (Rs) (Rs cr)
FCCD 1,081,081 934 100.97
Equity Shares 1,000 934 0.09
Warrants* 1,513,514 934 - 1284 141.36 – 194.34
* Conversion Price is linked to consolidated EBIDTA of CY08

Conversion Total Amount including Deal with global fund


EBDITA CY08 Price Amount payable FCCD & Equity shares Blackstone to raise
(Rs cr) (Rs) (Rs cr) (Rs cr) Rs 242.43 – 295.40 crore
Up to 190 934 141.36 242.43 by diluting 10.39% equity
190 - 200 1,109 167.85 268.92
200 - 210 1,209 182.98 284.05
> 210 1,284 194.34 295.40
Source: Company, ICICIdirect Research

While this stake sale will result in a dilution of up to 10.39% of the equity post
conversion, we believe that this equity infusion will help Allcargo fund its
growth plans. The company is also likely to benefit from the vast management
experience the global fund will bring on board.

7|Page
Merger of TransIndia to enhance infrastructure support services
To expand its business under the infrastructure support services, Allcargo
acquired the projects and equipment division of promoter-owned company,
TransIndia Freight Services Private Ltd, in October 2007. The project and
equipment division, which accounted for 95% of TransIndia’s business, was Merger of TransIndia is likely
merged with Allcargo Global with retrospective effect from January 1, 2007. to enhance Allcargo’s
infrastructure services and
project cargo business
TransIndia owns and operates a diverse mix of assets providing support
services to the logistics and infrastructure space. The division is primarily
engaged in the business of contracting transportation of containers and project
related cargo; hiring out cranes, trailers & other infrastructure equipments as
well as port handling (general cargo & containerised cargo).

Exhibit 10: Equipment owned by TransIndia (as on Dec 2007)


Equipment Number
Cranes 18
Forklifts 40
Reach stackers 6
Trailers 233
Source: Company, ICICIdirect Research

The company has a fleet of 18 cranes with capacities ranging from 25 – 750
tonnes. These cranes are used in industrial manufacturing and infrastructure
sectors such as power, oil and gas refineries, wind energy, steel and cement.
The fleet is fairly diversified and includes multiple crane types like all terrain
cranes, crawler cranes, telescopic cranes and lattice boom cranes from well
known manufacturers.

Foray into air cargo operations


Allcargo diversified its product offering by entering into air freight forwarding
business. It bought Hindustan Cargo, a subsidiary of Thomas Cook for Rs 8.91 Acquisition of Hindustan
crore in January 2007 in an all cash deal. Cargo to diversify into air
freight transport business
Hindustan Cargo specialises in air freight transport business and has 9 offices
in India and 120 agents worldwide. We believe that this acquisition
supplements Allcargo’s existing strength in ocean freight logistics. Allcargo
plans to synergize the operations of both the companies achieving economies
of scale by expanding in airfreight and sea freight.

Air Freight Transport is usually used for high value items and perishable goods
for increased safety and faster delivery. Around 10% of India's EXIM trade is
through air. Going ahead, this segment will not only diversify but also add to
overall revenues.

8|Page
RISK & CONCERNS

Margins hit by ECU Line acquisition


Allcargo’s standalone margins are higher compared to that of subsidiary, ECU
Line. This is mainly due to ECU Lines’ MTO /NVOCC model, which is a high-
volume, low-margin business. As a result, Allcargo’s high margins (before the
acquisition) dropped sharply during CY06.

Going forward, we expect consolidated operating margins to improve from


7.35% in CY07 to 12.14% in CY09E. Margin expansion will be driven by
various restructuring exercises undertaken by the company to improve ECU
Line’s margins. Post restructuring, we believe increasing contribution from the
new CFS/ICDs (likely to be operational in CY10) would drive margin expansion.

Exhibit 11: Profitability margins to remain flat


25 21.48

20

15 17.64 12.14
9.81
(%)

8.92 Acquisition of ECU Line


10 7.35 could depress Allcargo’s
margins
5
6.70
4.75 5.65
4.34
0
FY06 9MCY06 CY07 CY08E CY09E
EBIDTA margin (%) NPM %
Source:Company, ICICIdirect Research

Margin pressure at JNPT, new CFS/ICDs to take time to mature operations


The huge margins (40-50% EBIDTA) earned by CFS operators is attracting a
large number of players at the JNPT port, resulting stiff competition. This is
likely to impact Allcargo’s CFS business, which is mainly dependent on JNPT.
The CFSs at Chennai and Mundra are smaller in scale of operations and
realisations per TEU. While the Chennai CFS has around 65% utilisation, the
Mundra CFS is witnessing only 25-30% capacity utilisation in terms of TEUs
handled. The new ICDs at Nagpur, Hyderabad, Ahmedabad and Bangalore are
expected to be operational only by Q3CY09. These ICDs will take some time to
stabilise operations and attain critical mass.

9|Page
FINANCIALS

Stable growth in revenues


Consolidated revenue is expected to grow at a 13.67% CAGR over CY07-09E
on back of increasing MTO business, ECU Line and expansion of CFS network
to various new locations.

Exhibit 12: Steady growth in consolidated revenues

127.73
2000 98.26 57.38
131.93 Consolidated revenue to
50.34
103.12
94.28 45.76 grow at 12.59% CAGR over
1500 CY07-09E on back of the
(Rs cr)

MTO business and


1000 1503.06
1378.96 expansion of CFS network
1276.81

500

226.20 270.38 302.82


0
CY07 CY08E CY09E
MTO ECU Line CFS / ICD Hindustan Cargo TransIndia
Source:Company, ICICIdirect Research

ECU business is expected to see a stable CAGR of 8.5% over the same period
as it operates in the mature European markets. However, standalone MTO
operation is likely to witness a 15.7% CAGR on back of robust domestic trade
and economic growth. Revenues from CFS/ICD operations are likely to witness
a 18.29% CAGR on the back of increasing volumes handled from the new
CFSs, apart from and expanded capacities at Chennai.

Net profit to show a healthy growth of 29.39% over CY07-09E


We expect consolidated net profit to increase at a 29.39% CAGR over CY07-
09E. Allcargo is currently in an expansion phase in India, while its international
business is likely to stabilise in a couple of years. It has undertaken various
initiatives to improve operating performance of ECU Line. It also plans to
expand its CFS/ ICD business, which enjoy higher margins, while diversifying
into infrastructure support services and air freight transport.

Exhibit 13: Consolidated net profit and EPS trend


140 50

120 45
Net profit to show a 29.39%
100
40 CAGR over CY07-09E
(Rs crore)

80
(Rs)

35
60

40 30

20 25
FY06 9MCY06 CY07 CY08E CY09E
Adj Net Profit (Rs cr) EPS (Rs) (RHS)
Source; Company, ICICIdirect Research

10 | P a g e
VALUATIONS
Allcargo is India’s largest MTO and the world’s second largest NVOCC. It has
aggressive growth plans to expand its CFS/ICD network. It has already
acquired land at five locations including Pithampur, which will be operational Current valuations factor in
by July 2008. The other facilities are expected to be fully operational only by the near term growth
CY10. We believe that over the long term, restructuring at ECU will bring in opportunities
operational efficiency and result in margin expansion, while commencement of
new CFS/ICDs will drive volume growth. The infrastructure support services
and air cargo business are still in the nascent stages, and would take time to
contribute significantly to the revenues.

At the current price of Rs 840, the stock is trading at 20.83x it CY08E


consolidated earnings (EPS) of Rs 40.33 and 17.50x its CY09E EPS of Rs 47.99.
On an EV/EBIDTA basis, the stock is available at 10.80x CY08E earnings and
8.36x CY09E earnings. Though we are upbeat on the future prospects of the
company, we believe current valuations have already factored in near-term
growth opportunities.

Blackstone has valued the company at Rs 934 at the lower side and Rs 1284 on
the higher side on the basis of the company’s CY08E EBIDTA earnings (see
Exhibit 8). We estimate the company’s CY08E EBIDTA at Rs 186.51 crore. On
the basis of Blackstone’s valuation table, we arrive at a target price of Rs 934,
valuing the company at 12x its CY08E earnings on an EV/EBIDTA basis. We
rate the stock a PERFORMER.

Exhibit 14: One-year forward rolling EV/EBIDTA band


3500
3000 22x We value the stock at 12x
18x
its CY08E earnings on an
2500
EV/EBIDTA basis, arriving at
EV (Rs cr)

2000 14x a target price of Rs 934


1500
10x
1000
500

0
Jun-06

Aug-06

Oct-06

Dec-06

Feb-07

Apr-07

Jun-07

Aug-07

Oct-07

Dec-07

Feb-08

Source: ICICIdirect Research

Exhibit 15: Peer comparison (Estimates for FY09E)


Price Market Cap Revenue PAT EPS P/E EV / ROE ROCE
Company (Rs) (Rs cr) (Rs cr) (Rs cr) (Rs) (x) EBITDA (%) (%)
Allcargo Global * 840 1881 1901 90 40.3 20.8 10.8 14.8 16.9
TCI 106 822 1391 28 3.6 29.1 10.0 8.2 9.5
Gateway Distriparks 110 1271 354 93 8.1 13.6 8.9 12.9 13.7
Aegis Logistics 205 409 519 59 29.8 6.9 5.0 30.3 29.0
Source: ICICIdirect Research Estimates (* Estimates for CY08E)

11 | P a g e
FINANCIAL SUMMARY (Consolidated)
Profit and Loss Account (Rs Crore)
Year to Dec 31 9MCY06* CY07* CY08E CY09E
Net Sales 895.41 1643.05 1901.05 2122.93 13.67% CAGR in revenue over
% Growth 230.2% 83.5% 15.7% 11.7% CY07-09E
Employee cost 107.87 252.16 284.95 313.44
Operating Expenses 612.48 1119.60 1258.49 1367.17
Others 95.23 150.54 171.09 184.69
Total expenditure 815.58 1522.31 1714.53 1865.30
EBIDTA 79.83 120.74 186.51 257.63
Other income 4.98 8.04 0.00 0.00
Depreciation 7.88 18.88 45.75 65.29
Interest 5.26 5.64 18.70 24.29
PBT 71.68 104.27 122.07 168.04
Taxation 17.50 24.66 29.30 43.69
PAT 54.18 79.61 92.77 124.35
Extra ordinary items 7.82 0.38 0.00 0.00
Minority interest 1.65 8.38 2.47 4.46 29.39% CAGR in net profit
Adjusted Net Profit 60.35 71.61 90.30 119.89 over CY07-09E
EBIDTA margin (%) 8.92 7.35 9.81 12.14
NPM % 6.70 4.34 4.75 5.65
Shares O/S (crore) 2.03 2.24 2.24 2.50
EPS (Rs) 29.75 31.98 40.33 47.99

Balance Sheet (Rs Crore)


Year to Dec 31 9MCY06 CY07E CY08E CY09E
Sources of funds
Equity Share Capital 20.29 22.39 22.39 24.98 Equity dilution on
conversion of warrants and
ESOPS Outstanding 0.77 0.77 0.77 0.77
FCCD by Blackstone
Advance against Warrants 0.00 0.00 50.34 0.00
Reserves & Surplus 373.71 463.28 538.23 877.36
Secured Loans 68.48 115.00 215.00 283.00
Unsecured Loans 9.11 9.11 4.98 2.78
Deferred Tax Liability -1.29 2.79 5.79 8.79
Current Liabilities & Provisions 201.80 242.24 281.55 317.67
Minority interest 5.26 5.26 5.26 5.26
Total Liability 678.12 860.84 1124.30 1520.60
Application of Funds
Net Block 273.77 381.89 551.15 735.85
Increase in net block due to
Capital WIP 34.00 42.00 29.00 45.00 capacity expansion of CFS /
Investments 57.79 63.04 56.98 68.22 ICD business and capex of
Cash 45.03 58.91 87.05 231.95 TransIndia
Trade Receivables 186.10 303.97 371.01 407.14
Loans & Advances 80.84 10.42 28.52 31.84
Miscellaneous Expenditure 0.60 0.60 0.60 0.60
Total Asset 678.12 860.84 1124.30 1520.60
* Financials for CY06 is for nine months, as the company changed its accounting period to
calendar year to match that of ECU Line. CY07 financials are unaudited, and the Balance sheet is
our estimates

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Cash Flow Statement (Rs Crore)
Year to March 31 9MCY06 CY07E CY08E CY09E
Opening Cash Balance 41.24 45.03 58.91 87.05
Adj Profit after Tax 60.35 71.61 90.30 119.89
Misc Expenditure w/off 1.05 0.00 0.00 0.00
Dividend Paid 0.00 (12.25) (15.44) (20.51)
Depreciation 7.88 18.88 45.75 65.29
Provision for deferred tax 6.74 4.08 3.00 3.00
Cash Flow before WC Changes 76.02 82.32 123.60 167.68
Net Increase in Current Liabilities 176.26 40.44 39.31 36.12
Net Increase in Current Assets 226.07 47.46 85.13 39.45
Cash Flow after WC Changes 26.21 75.29 77.78 164.34
Capex on expanding CFS/ICD
Purchase of Fixed Assets (568.95) (135.00) (202.00) (266.00)
network and purchase of
(Increase) / Decrease in Investments 375.90 (5.25) 6.06 (11.24) cranes under TransIndia
Increase / (Decrease) in Loan Funds 55.05 46.52 95.87 65.80 business
Increase / (Decrease) in Equity Capital 115.58 32.31 50.43 192.00
Net Change in Cash 3.79 13.88 28.14 144.90
Closing Cash Balance 45.03 58.91 87.05 231.95

Ratio Analysis
Year to March 31 9MCY06 CY07 CY08E CY09E
EPS (Rs) 29.75 31.98 40.33 47.99
Book Value (Rs) 194.61 217.27 273.22 361.47
Enterprise Value (Rs Crore) 1736.56 1945.86 2013.68 2152.52
Market Cap (Rs crore) 1704.01 1880.67 1880.75 2098.70
EV/Sales (x) 1.94 1.18 1.06 1.01
EV/EBIDTA (x) 21.75 16.12 10.80 8.36
Market Cap to sales (x) 1.90 1.14 0.99 0.99
Price to Book Value (x) 4.32 3.87 3.07 2.32 Margin to recover on account
Operating Margin (%) 8.92 7.35 9.81 12.14 of initiatives under ECU Line,
expansion of high margin
Net Profit Margin (%) 6.70 4.34 4.75 5.65
CFS and infrastructure
RoE (%) 15.29 14.72 14.76 13.28 support service
RoCE (%) 16.29 18.00 16.93 16.18
Debt/ Equity (x) 0.20 0.26 0.36 0.32
Current Ratio 1.55 1.54 1.73 2.11
Debtors Turnover Ratio 4.81 5.41 5.12 5.21
Fixed Assets Turnover Ratio 2.91 3.88 3.28 2.72

Du Pont Analysis
PAT / PBT 0.84 0.69 0.74 0.71
PBT / EBIDTA 0.90 0.86 0.65 0.65
EBIDTA / Sales 0.09 0.07 0.10 0.12
Sales / Assets 1.32 1.91 1.69 1.40
Assets / Equity 1.72 1.77 1.84 1.68
RoE (%) 15.29 14.72 14.76 13.28

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RATING RATIONALE

ICICIdirect endeavours to provide objective opinions and recommendations. ICICIdirect assigns ratings to its
stocks according to their notional target price vs. current market price and then categorises them as
Outperformer, Performer, Hold, and Underperformer. The performance horizon is 2 years unless specified and
the notional target price is defined as the analysts' valuation for a stock.

Outperformer: 20% or more;


Performer: Between 10% and 20%;
Hold: +10% return;
Underperformer: -10% or more.

Harendra Kumar Head - Research & Advisory harendra.kumar@icicidirect.com

ICICIdirect Research Desk,


ICICI Securities Limited,
Ground floor, Mafatlal House,
163, H.T. Parekh Marg,
Backbay Reclamation,
Churchgate,
Mumbai – 400 020

research@icicidirect.com

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