Allcargo Terminals Limited (ATL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 and 9 months FY '25 Earnings Conference Call of Allcargo Terminals Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. We are pleased to have with us management team represented by Mr. Suresh Kumar R, Managing Director; Mr. Pritam Vartak, CFO; and Mr. Sanjay Punjabi, Investor Relations for Allcargo Terminals Limited. We will have opening remarks from the management, followed by a question-and-answer session. Thank you, and over to you, sir.

Good morning, everyone. This is Suresh here. A very warm welcome to all of you on the Q3 FY '25 Earnings Conference to discuss the company's quarterly performance. As mentioned, along with me, I have Pritam Vartak, the Chief Financial Officer of Allcargo Terminals; and Sanjay Punjabi from our Investor Relations team. We have uploaded the results, press release and presentation on the Stock Exchanges and company's website. I hope you had an opportunity to go through the same. I will share a brief overview of the economy, industry and our business, after which, I'll hand over the call to Pritam to discuss the financial performance. The global economy is expected to remain stable, though the strength of growth varies significantly across countries and regions. The IMF predicts global economic growth to be 3.3% in the calendar year 2025 and '26, below the historical average of 3.7% from 2000 to 2019. For us, closer to home, the growth in India looks strong, the outlook remains strong. The IMF has projected 6.5% growth for financial year 2025 as well as '26, reflecting the country's robust potential. The Indian economy is set to accelerate, fueled by government-led initiatives in manufacturing and infrastructure development. Coming into global ocean trade, heading into 2025, the global ocean trade continues to be surrounded by challenges. From the last year, the ongoing disruptions in the Red Sea, the Panama Canal, the geopolitical issues and potential U.S. tariffs, the new one. The United Nations State and Development Agency expect global trade to expand at a modest pace, driven by recovery of demand. Some light on the merchandise trade during the first 9 months of the financial year. Exports during April, December '24 was USD 321 billion compared to USD 316 billion during the period in the previous year. There is a growth of about 1.6%. Merchandise imports in the same period was USD 532 billion compared to USD 506 billion during the same period last year. Now let me take you through a few pertinent points about Allcargo Terminals Limited. I'm happy to share with you that the last 9 months has been highlighted by growth in a strong and consistent manner. As reflected in growth in volumes by 2%, growth in revenue by 4% and growth in EBITDA by 5%. Our focus on improving profitability has enabled us to maintain EBITDA per TEU more than INR 2,000 for the second quarter running. And the EBITDA per TEU that we have in Q3 of INR 2,179 is the highest since Q4 FY '23. Other action in the company include the Board approving the acquisition of the 15% stake in our existing subsidiary, Speedy Multimodes, via share swap deal. Post transaction, Speedy will become a 100% subsidiary of Allcargo Terminals Limited. We are successful in securing extension of Speedy Mundra facility. This is the SAMO partnership with CWC and this gives us the second facility in Mundra for an additional period of 6 years. Keeping an eye on the future, we have also expanded capacity by signing a lease for 22 acres adjacent to the existing facility in the important market of JNPT. With these as the highlights, let me now hand over the call to Pritam to give you a rundown on the financials for Q3 and for the 9 months of FY '25. Thank you.

Good afternoon, everyone, and thank you, Suresh. Welcome to our Q3 and 9 months FY '25 earnings call. I'll be taking you through the financial highlights starting with the quarterly results. In Q3 FY '25, we handled 1,49,000 TEUs compared to 1,58,000 TEUs in Q2 FY '25 and 1,54,000 in Q3 FY '24. Our Q3 FY '25 revenue reached INR 187 crores, a slight increase of 1% year-on-year but down from INR 195 crores in the previous quarter due to lower volume in line with [indiscernible] trend. Q3 FY '25 EBITDA, excluding other income, was INR 32 crores, up 11% compared to the same quarter last year, flat as compared to Q2 FY '25. Improved yield and operating efficiencies resulting in maintaining EBITDA per TEU well above INR 2,000. For Q3 FY '25, sales stood at INR 2,179, up 16% on a year-on-year basis. Our Q3 FY '25 net profit was INR 12 crores, a 19% decrease year-on-year, primarily due to accelerated amortization related to change in useful life of CWC contract at Speedy Mundra, which is an exceptional item and additional other income accounted in the previous year. Looking at 9 months FY '25 results, we achieved 2% volume growth. Revenue for this period was INR 572 crores, also a 4% increase year-on-year. EBITDA reached INR 95 crores compared to INR 91 crores in the same period last year. Net profit for 9 months FY '25 was INR 33 crores, slightly down from INR 35 crores last year due to exceptional items. With this, I would like to open the floor for question-and-answer session.

[Operator Instructions] The first question is from the line of Shaukat from Monarch PMS.

Just wanted to understand about the time line of the new projects, particularly that JNPT project that is coming in. And also, if you can give us some light about how the IRR of these projects are? Will it be ROCE dilutive, most of these new projects that are coming up, so JNPT as well as Mundra thereafter that ICD projects, we believe that, that is ROCE accretive. But how these 2 projects are in terms of internal rate of return?

So thanks, Shaukat, for the question. So this JNPT extension, which we have already contracted for the lease land, which is very adjacent to our existing JNPT facility, will be coming into effect -- coming into operations from first quarter of next year, that is FY '25, '26. This is an already existing facility, so we are not incurring substantial CapEx there. As declared, the capacity expansion could be in the range of 1,20,000 TEUs to 1,50,000 TEUs for this. So this -- as I told, we are not expecting any substantial CapEx investment for this particular project. So there would be an IRR, which would be in line with what we are earning on our existing projects. Projects like Farrukhnagar, where we will have to make our own investments, we are anticipating around INR 150 crores of investment for Farrukhnagar project and estimated IRR would be in the range of 25% to 30% for this kind of CapEx-intensive projects.

And how about Mundra project, that -- what is the internal rate of return that you are targeting from that project?

Mundra would also be a project where we will have to invest. We have invested into land and we'll also invest into the construction of CFS. And the IRR would be in line with what I told you for other projects, which is in the range of 25% to 30%.

Got it. Another question from my side that January numbers, volume numbers were quite encouraging, 11% Y-o-Y growth. So how do you see these numbers going forward, particularly in February and March? These numbers are sustainable in terms of growth and in terms of volume?

Yes. Shaukat, again, Suresh here. Thank you for the question. January volumes is a good strong growth in line with market volume. We expect February, March to follow the seasonal patterns that we have seen in the last years, which is the Chinese New Year affecting the second half of February. March, typically, because it's year-end for a lot of companies, there is a certain amount of inventory action which happens, which will help in building volumes. March traditionally has been a strong month for us. And therefore, we expect Q4 volumes to be similar to the volumes that we would have recorded in Q2, Q3 -- Q2 and Q1 of this year.

[Operator Instructions] The next question is from the line of Viral Shah from Adinath Tax Consultancy.

Hello?

Yes, sir, you are audible.

[Foreign Language] regarding income tax [Foreign Language] as on 10th February. So question regarding [indiscernible].

On income tax, search and seizure operation, which was conducted, I will just like to mention here that in the previous week, the income tax authorities conducted the search and search operation at our facilities and offices. The company fully cooperated with the investigating offices. Since the conclusion of the search till date, the company has not received any written communication from the IT department regarding the outcome of the search operation. The company operations, I would state that are running smoothly, and the entire management team continue to work wholeheartedly to ensure that the company keeps up on the growth trajectory. On the future course of action, I will say the law will take its own course, and we will keep our stakeholders posted on all the future developments. As of now, we are waiting to hear from income tax department in terms of outcome of the operation, which was conducted.

Sir, does that answer your question?

Yes, okay.

[Operator Instructions] The next follow-up question is from the line of Viral Shah from Adinath Tax Consultancy.

HORCL and Farrukhnagar DFC plant, when will we get will be fully operational? And another question, madam, can I go ahead with it? Madam, my another question is our 9-month year-to-year revenue and profit after tax margin are as per our expectation or our -- below expectation?

So the HORCL project in which we have invested and we have a stake, this gives us DFC connectivity for the proposed Farrukhnagar ICD facility. The proposed Farrukhnagar ICD facility is expected to be operational December, January -- December '26, January '27. And the HORCL project is proceeding as per plan to enable the connectivity for us. So that is as per the originally planned time lines, both for the project and for our facility to start. With regard to performance for the first 9 months, I would request Pritam to share a few points.

So in terms of -- I will just revisit the numbers, which we have already talked about, to answer this question. We have -- on a YTD year-on-year basis, we have grown our volume by 1% -- 2% and the revenue has also grown by 4%. So there is a growth in terms of volume and there is a growth in terms of revenue as well. The important point here is our revenue per TEU is now INR 12,569 and that is showing a 5% year-on-year growth and 2% quarter-on-quarter growth. The gross margin also stood at 34%, reflecting a 7% year-on-year increase and 2% quarter-on-quarter increase. EBITDA improved by 11% year-on-year, reflecting a positive impact of higher gross margin. So that way, on a year-to-date basis, PBT before exceptional costs increased by 6%, rising from INR 41 crores to INR 43 crores compared to the same period last year. So also in terms of other parameters related to financial parameters, so DSO of a company remains strongly in control. Working capital is -- currently is negative working capital we are having. We are having a very strong debt-to-equity ratio and return on capital employed is around 35%. So all these parameters, we are going in a direction -- in the right direction. Our profitability is stable. Our gross margin has improved in this quarter and EBITDA per TEU, which is at close to INR 2,200, that is a substantial improvement over last year. So on that -- on these financial parameter, company has performed very strongly for this 9 months and also for this quarter. And we hope to continue this growth in near future as well. So that way, to answer your question, yes, on the profitability parameters and on the financial parameters, the company has performed as per the expectation of the management. Obviously, we will like to grow stronger and we'll have to -- we'll like to have our volume to grow much higher once various projects which are in pipeline that will crystallize, and we will have higher volume and higher revenue growth in coming years.

Thank you. Thank you, Pritam. And Mr. Viral, just to add to it, apart from the financial numbers, which Pritam has talked about, the 9 months, we also had plans to build capacity and plans for the future. And I think those plans are proceeding well because we are running at capacity utilization close to 80%, 85% and therefore, for the future, it is important that we build capacity. The projects that you asked and the projects that we mentioned with regard to additional lease land capacity in JNPT, extension of our CWC partnership in Mundra, acquisition of additional land in Mundra, acquisition of the HORCL stake. All of these are meant to secure our future and ensure that the growth continues in a strong manner like what Pritam has described. I hope that answers your question, Mr. Shah?

Yes, very much.

[Operator Instructions] As there are no further questions from the participants, I would now like to hand the conference over to Mr. Suresh Kumar for closing comments.

Thank you. Thank you, Sejal. I would like to close by saying that we have had a quarter and the first 9 months of the year in which we have grown on all important parameters. Business fundamentals are strong. Our investments and plans for the future are well in place, and we look forward to a strong quarter 4 to sign off the whole year on a growth note. Thank you.

On behalf of Allcargo Terminals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.