What are Gopal Kavalireddi's views on Allcargo Logistics stock for investment?

Written on Nov 27, 2017

Logistics as a sector has been under serious transition over the last 1–2 years and GST was supposed to be a major reform, bringing the organized players like All Cargo, Gati, VRL Logistics, Chartered Logistics etc to improve their margins. However, not much has happened even after 3 months of GST introduction.

A simple look at the logistics stocks on Stock Screener for Indian Stocks: Screener.inwill highlight the issues. All Cargo has the lowest operation margin in the group with just 7.83%. On a sales turnover of Rs. 1800 cr, the net profit is only 65 cr. which is very less.

Over the last 12 quarters, the sales are stagnant with the operating profit margin dipping further.

Obviously, this financial performance is reflected in the stock performance, which has not even given savings bank returns of 4% in 1 year.



Though Sical Logistics and Gateway Distriparks are showing better operating profit margins, the pledged promoter shareholding is a worry. Blue Dart, VRL Logistics and TCI Express have high P/BV which is not a preferred option.

Hence, logistics sector is in a precarious situation, with none of the stocks filtering out to be possible selections for investment. However, with the private investment push that is happening currently, infrastructure is getting a good boost. Once we see more projects commencing, we can expect higher movement of goods and materials, which can be reflected in better sales performance. Net Profit would need to be checked if the pricing pressure continues in the same manner in the coming quarters also or if it will ease out soon.

Financial data credits: Stock Screener for Indian Stocks: Screener.in

Stock graph credits: Fyers - Your Next-Generation Online Stockbroker