Buy Allcargo; target of Rs 213: Motilal Oswal

Motilal Oswal's research report on Allcargo

We expect AGLL to create value in the medium term from strong growth in contract logistics through its subsidiary, ACCI. Monetization of land parcels by roping in strategic partners would add further value to the company. The MTO segment should continue to see growth in profits, led by strong revenue growth due to rising proportion of FCL shipments coupled with stable margins. Also, the management has taken multiple initiatives, which should result in an improvement of the company’s overall return ratios. AGLL trades at 11x FY20E EPS, which is attractive, given improving return ratio profile and 16% earnings CAGR over FY17-20E.

Outlook
We value AGLL on 14x FY20E EPS and arrive at a target price of INR213, implying 25% upside. We believe an additional value of 25-30% of present market capitalization could get created in the medium term from contract logistics, land monetization and entry into last mile delivery, which we are not factoring into our present target price. Maintain Buy.

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