Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

AVG logistics

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Business

AVG Logistics Ltd, incorporated in 2010, provides road transportation services, warehousing facilities and Railway transportation to various domestic and multinational companies.  AVG Logistics provides customized and technology-driven solutions across transportation, warehousing, distribution, and supply chain management. Furthermore, the Company also offers Third-Party Logistics Services (3PL), effectively complementing its wide range of logistics solutions. Company mission is to offer an integrated Multimodal network of Logistics
solutions across varied industries

Products, Segments and Strengths

Transportation: Express Delivery, Refrigerated Transportation, Freight Forwarding, etc
Warehousing: Manpower Handling, Packaging, Multi-User Warehouse facility, etc
Value-Added Services like custom clearance, E2E solution, Multimodal transportation, Reverse logistics, etc.
The Co. also undertakes transportation services to Nepal, Bangladesh and Bhutan

AVGL had the agreement of 1 – 3 years with all its major customers and the agreement includes the escalation clause based on the 5% change in the diesel cost

Fleet Size
The Co as of 31st December 2023 has a fleet size of more than 3000+ vehicles, including hired & owned dry/reefer vehicles. Owned vehicle fleet is approx 500+

Network
The Co has a pan India presence with 50+branches and 7 zonal offices.

Company caters to 6 rail routes and can deliver 1 to 40 tons of logistics

9 trans-shipment hubs for LTL services, 1 owned fleet maintenance hub
~7,.05L sq. ft. of warehousing footprint pan India ( 81,000+ sq. ft. Owned and 6.24L leased Warehousing Space). Further expansion happening

Company has certain moats/advantages wrt new entrants in terms of

• 3 decades of promoter experience
• End to end solution provider
• Multimodal transport
• Distribution network is strong pan India
• Client relationships with dedicated warehouses for Nestle, HUL and Mother dairy
• Reverse logistics
• Tech-enabled fleet with GPRS systems
• and Asset light model of fleet
• Company also offers Rail logistics
• Also offers Cold chain logistics
• Versatile Solutions For Efficient Storage & Operations (caters to liquid, container, Agri, FMCG, chemicals)

It offers a range of rail logistics services to its customers, including Full rack and piece meal transportation, container movement, and terminal management across all CONCOR ICDs. This is very important in bigger scheme of things in coming years

Cold chain logistics is the segment to watch out for in coming decade

Company has a clear focus on Tech Initiatives regarding its operations. Company keeps on finding Disruptive & Innovative Customised Solutions. Zero Residual Food Grade Tanker is one of the solutions. Curtain Multi-door Truck is another solution

Clients

Reputed clientele in diverse sectors like FMCG, Chemicals, Power, Electrical, automotive like Nestle, Mother Dairy, ITC Ltd, Coca-Cola etc

Well recognized by clients and external agencies in terms of awards and recognition

Fundamental Ratios, Cash, Loans, EBITDA, PAT margin, SHP

Similarly ROCE and ROE are decent.

Debt to Equity is high and needs to be closely monitored

Cash conversion cycle is stable and Working capital days are also stable

Shareholding pattern

Promoter has skin in game. FII adding, DII selling. Public domain have few strong holdings as well but overall public holdings have increased

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Recent Developments in last 1.5 years

Tie up with railways :Signed 6 tenders worth ₹510 cr with Indian Railways for 6 leased parcel trains.

They also got 150 crore contract from Indian Railways for operations of Leased Parcel Express Train. This special train, connecting Bangalore to Ludhiana (Punjab), will complete one round trip every week over the next 6 years, totaling 313 trips. The Express Service will cover the distance in ~72 hours ensuring expeditious, seamless connectivity between the important locations. Ludhiana is an invaluable addition to our railway network, opening doors to a gigantic textile market -largest hosiery manufacturing, cotton textiles, cycle manufacturing amongst others

QSR clients :Started servicing QSR clients

Expanding the cold chain and parcel division. Company is acquiring 50+ fleet of cold chain vehicles to enhance its cold chain capabilities

Also is Upcoming 50,000 sq. ft. Owned Warehousing Space In Agartala

JV : Joint Ventured with Sunil Transport for liquid logistics.

EV Fleet : They are planning to introduce electric vehicles in their fleet in the future.

Company also recently had a collaboration with Blue Energy Motors (BEM), India’s only LNG truck manufacturers. This represents a significant leap towards a more sustainable and eco-friendly future in the transportation industry. This landmark collaboration is formalized through a strategic Transportation as a Service (TAAS) Agreement, wherein AVG Logistics and BEM join forces to integrate LNG-powered vehicles. The collaboration underscores a shared commitment to advancing sustainable transportation practices and fostering a greener future.

Backward integration for last mile : Incorporated a Wholly owned subsidiary named ‘Galaxy Packers and Movers’

They have onboarded Gazal Kalra, co-founder of Rivigo, as a strategic advisor to guide them on sustainability and technology. She also Subscribed to Warrants at 371 Rs

Company has also raised funds at 371 Rs/Share through

• ISSUE OF CONVERTIBLE WARRANTS ON PREFERENTIAL BASIS TO PERSONS BELONGING TO PROMOTER CATEGORY
• ISSUE OF CONVERTIBLE WARRANTS ON PREFERENTIAL BASIS TO PERSONS BELONGING TO NON-PROMOTER CATEGORY
• ISSUE OF EQUITY SHARES ON PREFERENTIAL BASIS TO NON-PROMOTERS

Govt Initiatives to Improve Infrastructure aid Logistics growth : India aims to reduce logistics cost from 13% – 14% of GDP to 8% – 10% of GDP. It is estimated that a 10% reduction in indirect logistics cost will result in 5% to 8% rise in exports. GOI to undertake multiple logistics specific initiatives, such as GatiShakti, National Logistics Policy and others. These programs aim to streamline India’s logistics sector by making it more green, agile, transparent and integrated.

Valuations

Expected sales projections for FY25 is ~700cr and with PAT margin of ~7-8.5%, we get PAT of 50-60 cr. So stock price may move towards 700-900 by 31Mar25. There could be volatility in stock which can be used for accumulation

Risks

High Debt to Equity Ratio. This needs to be monitored very closely

New warehouse opening and its utilization

Renewal of contracts with customers on favourable terms needs to be watched out

High capital working requirements remain a risk.

High competitive industry

Technicals on 11Feb24

Stock has been consolidating between 400-460

Technical chart on 16 Mar24

Conclusion

If you have understood the triggers and industries it cater to + RISKS which can materialize and have patience then think of buying this company in every dip, market offers, else Ignore the stock

Stock might be volatile in short term and give a chance to buy for long term investment purpose

Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

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