Allcargo Gati Nov-24

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Questions and Answers

What was the percentage decrease in the Express Logistics business during the first quarter?

2.5%

3.5%

3% (correct)

What was the half-yearly revenue growth rate mentioned?

2.7% (correct)

3.2%

1.5%

What factors are contributing to the shift from the unorganized sector to the organized sector?

Decrease in regulatory measures

Expansion of services

Strong government regulations (correct)

Increase in pricing competition

How has the company performed in terms of market share over the last few quarters?

Market share has remained intact Signup and view all the answers

What does a loyalty ratio above 1 indicate for an organization?

More upgraders and new customers than lost ones Signup and view all the answers

What was one reason mentioned for other listed peers struggling to grow their revenues?

Loss of market share to unorganized players Signup and view all the answers

What does the term 'share of wallet' refer to in the context of customer retention?

The amount spent by a customer on all services from various providers Signup and view all the answers

How does the company assess its customer loyalty?

By measuring the loyalty ratio of upgraders to lost customers Signup and view all the answers

What margin range have some competitors experienced recently?

12% to 13% Signup and view all the answers

What was the reported gross margin last year?

25.3% Signup and view all the answers

What is the current EBITDA margin for the half year?

5.3% Signup and view all the answers

What is the target for further gross margin improvement set for this year?

Increase by 1% each quarter Signup and view all the answers

What has been a major factor countering the target margin improvements?

Rising operational costs Signup and view all the answers

What is the expected trend in volume growth for the next quarter?

Poised to increase Signup and view all the answers

How do the company's current margins compare with those of its competitors?

They are significantly higher than competitors' margins. Signup and view all the answers

What was the gross margin trajectory projected for the company?

27% Signup and view all the answers

What was the increase in volumes from September to October?

108 to 118 Signup and view all the answers

What does Deepak Pareek indicate about the process of handling truckloads?

They are continuously learning and optimizing. Signup and view all the answers

How do the company's growth targets compare to industry growth?

They target 10% to 12% more than the market growth. Signup and view all the answers

According to Deepak Pareek, what will determine the timeline for achieving a positive PAT?

Time is not in their control. Signup and view all the answers

What aspect of the business is mentioned as being categorized to enhance gross margins?

Product mix. Signup and view all the answers

What key improvement does Deepak Pareek expect in the coming quarter?

Gross margins to improve. Signup and view all the answers

What was Raaj from Arjav Partners inquiring about?

Expected future profits. Signup and view all the answers

What is the tone of the discussion about the future profitability of the company?

Optimistic and forward-looking. Signup and view all the answers

What is the primary benefit of using data science in cost optimization?

It enhances efficiency and utilization of resources. Signup and view all the answers

Which aspect of costs is being managed efficiently according to the content?

Employee and administration costs. Signup and view all the answers

How does tech contribute to cost savings in the operation?

By driving efficiency and improving utilization of vehicles. Signup and view all the answers

What factor is considered when choosing the type of trucks for transportation?

The load requirements and distance. Signup and view all the answers

What is mentioned as a part of a cost management strategy in the last mile?

Outsourcing delivery through the Gati Associate model. Signup and view all the answers

Which element is NOT directly mentioned as part of the cost structure?

Supplier transportation costs. Signup and view all the answers

What approach is being taken to analyze the delivery process?

Employing algorithms to evaluate operational efficiency. Signup and view all the answers

What are the factors considered for cost optimization during the line haul?

Truck types, loads, and elimination of touch points. Signup and view all the answers

What factor is emphasized as being more important than being lower or higher than the competition?

The value brought to a customer's business Signup and view all the answers

What has Allcargo Gati Limited not done for the past 3 to 4 years?

Increased its prices Signup and view all the answers

Why is it considered time for Allcargo Gati Limited to ask for a price increase?

They are absorbing increasing costs Signup and view all the answers

What percentage of total volumes do key account clients constitute for Allcargo Gati Limited?

65% Signup and view all the answers

What is the main focus of Allcargo Gati Limited according to Ketan Kulkarni?

Margin improvement Signup and view all the answers

What concern does Jainam Shah raise regarding price hikes?

Customers might reduce their volume Signup and view all the answers

How does Allcargo Gati Limited plan to manage increasing costs?

By absorbing costs temporarily Signup and view all the answers

What aspect is not included in the company's approach to pricing based on Ketan Kulkarni's statement?

Inventory management Signup and view all the answers

What does Ketan Kulkarni imply about the company's market share over the last few quarters?

The company has maintained its market share with slight fluctuations. Signup and view all the answers

Why does Manjeet Buaria question the growth of the logistics industry?

He believes GDP growth guarantees industry growth. Signup and view all the answers

What can be inferred about the availability of market data for the top competitors?

Only a few competitors disclose their market numbers. Signup and view all the answers

What does Ketan Kulkarni suggest about the relationship between economic growth and industry growth?

Economic growth does not necessarily indicate industry growth. Signup and view all the answers

How does Ketan Kulkarni respond to concerns about the industry's growth?

He confirms that the industry has indeed grown. Signup and view all the answers

What reasoning does Manjeet Buaria use regarding industry growth and GDP?

He believes industry growth typically occurs if the economy is not in recession. Signup and view all the answers

What does Ketan Kulkarni suggest might affect market share estimates?

Data availability from competitors. Signup and view all the answers

What factor does Ketan Kulkarni indicate could lead to misunderstandings about industry growth?

Limited public data on few operators. Signup and view all the answers

Study Notes

Allcargo Gati Limited Q2 & H1 FY25 Earnings Conference Call

Date: November 8, 2024
Management Team: Ketan Kulkarni (Deputy Managing Director), Deepak Pareek (CFO), Sanjay Punjabi (Investor Relations)
Earnings Call Focus: Q2 and H1 of financial year 2025
Financial Highlights:
- GESCPL reported INR39 crore EBIT in H1 FY25, representing an 18% increase compared to the same period last year.
- Allcargo Gati handled its highest ever volume in October 2024.
- The company achieved 18% EBITDA growth in first half of FY25, GESCPL EBIT INR39 crores (H1 FY25).
- October 2024 saw a record volume.
- The company is debt-free and has a positive cash position of INR 170 crore as of September 2024.
Industry Outlook:
- Indian economy is resilient, with the IMF estimating 7% growth in FY26 and 6.5% in FY25.
- Global growth projected at 3.2% in 2024 and 2025.
- Logistics (especially express delivery) is expected to support the manufacturing-led growth.
- E-way bills saw an 18% increase in September 2024.
Q2 FY25 Express Business Highlights:
- Total tonnage handled: 3,17,000 metric tons (Q2 FY25) compared to 3,33,000 metric tons (Q2 FY24)
- Revenue: INR 374 crore (Q2 FY25) compared to INR 385 crore (Q2 FY24)
- EBITDA: INR 19 crore (Q2 FY25), representing a 26% increase.
- Gross margin: 26.4% (Q2 FY25), up 305 basis points from 23.3% (Q2 FY23).
Consolidated Q2 FY25 Highlights:
- Revenue: INR 426 crore (Q2 FY25), down from INR 442 crore (Q2 FY24) and INR 408 crore (Q1 FY25).
- Gross profit: INR 100 crore (Q2 FY25), up 9% from Q2 FY24.
- EBITDA margin: 4% (Q2 FY25) compared to 3% (Q2 FY24).
Earnings Call Discussion:
- Questions covered market share, pricing strategies, cost efficiencies, and future growth prospects
- Management discussed reasons for industry-wide volume deceleration and answered concerns about competitive pressures
- Management outlined their strategies for margin expansion (e.g., targeting greater operational efficiency in line-haul transport and improved handling to increase operating revenue)

Other Information

Allcargo Gati's Corporate Structure and Restructuring: The company is undergoing corporate restructuring, this process is expected to be completed by the end of FY25.

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Description

This summary covers the earnings conference call for Allcargo Gati Limited for Q2 and H1 of FY25. Highlights include a significant EBIT increase, record handling volume, and strong financial positioning. The industry outlook reflects resilience in the Indian economy with promising growth predictions for the coming years.