Share price of Allcargo Logistics, one of India’s leading supply chain companies, has been under pressure since the start of 2023.

The share price has dropped over 11% so far in 2023, with most of the losses coming this week on Tuesday, when it crashed around 18%.    

This has come as a surprise for many as shares of Allcargo Logistics had a dream run in 2022 on the back of Indian government launching the National Logistics Policy.

Between July 2022 and December 2022, Allcargo Logistics rose over 50%.

Along with government initiatives, the company reported good quarterly results which supported the rally.

Let’s find out reasons why Allcargo Logistics shares have come under pressure in recent days.

#1 Dismal Q3 results

For the December 2022 quarter, the integrated logistics solutions provider saw a decline in sales and net profit.

The company reported a 26.8% YoY decline in revenue to Rs 40.9 billion (bn), mainly impacted by a fall in key segment revenues.

Among the company’s key segments, the revenue of the international supply segment dropped 28.4% to Rs 36.7 bn, whereas the express distribution segment saw a marginal rise of 5% YoY to Rs 4.4 bn.

The company’s profit after tax (PAT) stood at Rs 1.2 bn during the quarter, down 61.6% YoY.

This net profit includes Rs 324.7 million (m) from discontinuing operations like container freight station operations and other related businesses, which will be demerged into a separate entity.

Operating profit, or EBITDA (earnings before interest, tax, depreciation and amortization), for the December 2022 quarter fell 47.2% YoY to Rs 2.3 bn compared with the year-ago quarter.

The company’s EBITDA margins also dropped to 5.6% from 7.8% last year and from 7.2% in the September 2022 quarter.

This decline in operating revenues was due to a fall in freight rates.

Following the results declaration on 14 February 2023, shares of Allcargo Logistics tumbled over 17%.

#2 Sluggish volume growth going forward

Following a significant drop in volumes and realizations in December 2022 quarter, the company’s management now expects the volume growth to remain low in the next quarter.

Allcargo Logistics expects volumes to recover in the first quarter of financial year 2024.

Here’s what the company’s chief officer Ravi Jakhar said,

We expect some sluggishness in volumes from January to March 2023, while a rebound will take place starting in April 2023.

Also, in the quarter under review, the company’s peers Aegis Logistics and TCI Express both delivered growth in terms of revenue and profit.

This low earnings growth compared to its peers, along with low volumes recovery for the March 2023 quarter, has raised a big concern among investors, triggering the selloff.

How shares of Allcargo Logistics have performed recently

Allcargo Logistics share price is down 12.8% in the past five days, while over the past one month, the stock has fallen 11.3%.

So far in 2023, shares of the Allcargo Logistics have declined by 11%.

Allcargo Logistics touched its 52-week high of Rs 495 on 14 November 2022 and its 52-week low of Rs 249.2 on 20 June 2022.

It is currently trading at a PE (Price to Earnings) multiple of 31.7x, with the industry PE ratio being 4.2x.

Allcargo Logistics Share Price – 1 Month

About Allcargo Logistics

Allcargo Global Logistics is one of the global leaders in logistics.

The company operates mainly into three segments that is multimodal transport operations, container freight stations/ inland container depots, and project and engineering solutions.

The company is carrying out contract logistics business through its joint venture viz. Avvashya CCI Logistics.

It is among the leading players in the global LCL consolidation market, with a strong network across 160+ countries and 300+ offices covering over 4,000 port pairs across the world.

Allcargo Logistics operates India’s widest and strongest network of Container Freight Stations (CFS) and Inland Container Depots (ICD).

These operations cater to the handling import and export, cargo customs, clearance warehousing, and other ancillary logistics services.

Allcargo is also one of the pioneers and leaders in Project and Engineering services offering integrated end-to-end logistics services, including transportation of over-dimensional and over-weight cargo on-site lifting and shifting equipment leasing and coastal shipping.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com