NEW DELHI: In a challenging Q2FY25, Allcargo Gati (ACLGATI IN) posted a fourth consecutive quarterly revenue decline, underscoring the headwinds faced by the logistics sector. The company’s revenue dropped 3% year-over-year, hitting INR 4.2 billion, mainly due to a 5% decrease in volume to 317,000 tonnes. However, the company saw a slight 2% recovery in price realization, its first uptick after seven consecutive quarters of decline, following a recent price increase.
The company’s express segment, which constitutes 88% of its total business, witnessed a 3% contraction, recording INR 3.7 billion in revenue. Gross margins in the segment also dipped by 100 basis points quarter-over-quarter, landing at 26.4%, primarily driven by higher linehaul costs and limited reverse cargo movement. The overall EBITDA fell 5% QoQ to INR 190 million, with a 5.1% margin, marking a 50-basis-point drop due to increased operational costs, particularly in hub establishment. Nevertheless, the company’s net loss narrowed to INR 13 million, down from INR 38 million a year prior, largely due to debt repayments from QIP proceeds, reducing debt to INR 0.1 billion.
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Despite the lacklustre performance, Allcargo Gati’s management remains optimistic. The company has implemented Transformation 2.0, aimed at merging its operations with Allcargo’s contract logistics business by FY25-end. Management expects this merger to improve efficiencies, drive cost optimization, and enhance utilization, providing a foundation for future growth. With the October volume rising 4.4% YoY to 118,000 tonnes due to increased festival demand, management sees potential for recovery in the upcoming quarters.
In a bid to bolster revenue, Allcargo Gati recently announced a 10.2% general price increase (GPI) in its express segment, effective 2025. The company hopes that sustained single-digit price increases, combined with improved service quality, will gain acceptance among key customers. Early adoption of new rates has already been observed, and further price adjustments are expected by Q1FY26. Additionally, Allcargo Gati has postponed its retail price hike to December, rolling out updated tariffs in anticipation of a margin boost by Q4FY24.
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Looking ahead, analysts remain cautiously optimistic, reiterating an “Accumulate” rating with a target price (TP) of INR 110 based on a 25x FY27E P/E multiple. While the company faces near-term challenges from slow industry growth and the pending merger, analysts forecast a revenue CAGR of 14% and an EBITDA CAGR of 40% from FY24 to FY27.