AVG Logistics August 2024 Concall Highlights: Strong Growth and Diversification Drive Positive Outlook
AVG Logistics Limited delivered a robust performance in the first quarter of fiscal year 2024-25, driven by strong revenue growth, expanded business partnerships, and strategic initiatives focused on diversification and sustainability. The company reported a substantial year-on-year increase in revenue and profitability, demonstrating its ability to navigate a challenging market landscape. Notably, the company highlighted its new strategic contracts in the steel and cement sectors, which are expected to significantly contribute to future growth.
a. Financial Performance:
AVG Logistics' Q1 FY25 consolidated total income surged to INR 123.68 crores, reflecting a 22.75% year-on-year growth. EBITDA reached INR 23.62 crores, representing a 24.45% year-on-year increase and an EBITDA margin of 19.10%. This marks a significant improvement of 26 basis points year-on-year.
Profit after tax (PAT) amounted to INR 5.21 crores, a remarkable 105.90% year-on-year growth, resulting in a PAT margin of 4.21%. Earnings per share (EPS) reached 3.81, indicating a year-on-year growth of 77.21%.
On a standalone basis, the company also showed robust performance with total income at INR 123.39 crores, a year-on-year growth of 22.46%. The EBITDA stood at INR 23.55 crores, with a year-on-year increase of 24.05%, and an EBITDA margin of 19.09%. PAT reached INR 5.17 crores, marking a significant 148.24% year-on-year growth, and the EPS stood at 3.78, reflecting a year-on-year growth of 113.56%.
The company's debt level is also on a downward trajectory, with debt standing at INR 90.11 crores, compared to INR 88.88 crores as of March 31, 2024. Management reaffirmed its target to become debt-free by FY27-28.
b. Operational Updates:
AVG Logistics' operational performance was underpinned by several strategic initiatives. The company secured a contract with leading appliance manufacturers to implement rail transportation, enhancing safety and efficiency. This initiative underscores the company's focus on multimodal connectivity and sustainable logistics.
The company also received a significant land parcel allocation in Odisha, positioning itself for future growth in a rapidly developing industrial hub. Management outlined its plans to strategically shift its focus to green transportation through rail, LNG, and electric vehicles, aligning with the broader industry trends and sustainability goals.
The company's partnership with the UP State Road Transport Corporation (UPSRTC) for courier parcel services across 9,000 buses is expected to enhance operational efficiency and reach in Uttar Pradesh. Management expects this initiative to drive revenue growth, particularly in the express parcel delivery segment.
c. Management Insights:
Managing Director and Chief Executive Officer Sanjay Gupta highlighted AVG Logistics' commitment to innovation, strategic partnerships, and unwavering focus on customer satisfaction as key drivers of growth. He stated, "We are proud to announce several strategic initiatives that demonstrate our commitment to innovation, safety and sustainability."
Mr. Gupta also emphasized the company's commitment to operational efficiency and profitability. He noted that while the FMCG industry has traditionally been their core business, they are expanding into the steel and cement sectors where the payment terms and volume opportunities are favorable.
CFO Himanshu Sharma detailed the company's financial performance, highlighting the robust growth across various segments. He also shed light on the EBITDA margin trends, explaining the impact of a one-off event in Q4 FY24.
d. Strategic Initiatives and Future Plans:
AVG Logistics' expansion plans center around the steel and cement industries, where the company sees significant growth opportunities. Management expects these sectors to contribute 15-20% growth to its overall business. The strategic partnership with Dalmia Cement, Tata Steel, and other industry giants, including the use of LNG and electric vehicles, are integral to this expansion strategy.
The company is also leveraging its strong network and expertise in multi-modal logistics to expand its service offerings, including railway, truck, and cold chain transportation. The expansion of its rail network and the increasing use of electric and LNG trucks are core to achieving sustainability goals and enhancing operational efficiency.
e. Q&A Session Highlights:
Steel and Cement Sector: The company anticipates substantial revenue from steel and cement customers in the next 1-2 years, with targets exceeding INR 300 crores. Management highlighted the attractive payment terms and the large logistics volume in this sector as significant advantages.
UPSRTC Contract: This new business opportunity is expected to contribute INR 60 crores in revenue over the next five years, with a strong EBITDA margin of approximately 30%.
Packers and Movers: While this business is still in its nascent stages, the company is optimistic about its growth potential.
Succession Planning: Management emphasized the importance of succession planning, with Vinayak Gupta taking on a key role in shaping the company's technology and business development strategies.
Market Dynamics and Competition: Management acknowledges the intense competition in the industry but remains confident in its ability to differentiate based on its safety and sustainability focus, multi-modal logistics offerings, and ability to offer competitive pricing.
Key Takeaways and Outlook:
AVG Logistics' Q1 FY25 results showcased impressive growth, driven by strong revenue and profit expansion. The company's strategic initiatives in the steel and cement sectors, the UPSRTC partnership, and increased investment in sustainable transportation are expected to fuel future growth. Management reiterated its INR 700 crore revenue target for FY25, and the company's commitment to sustainability and operational excellence positions it well to capitalize on growth opportunities in the Indian logistics market. While the industry is facing challenges due to intense competition and rising fuel prices, AVG Logistics' focus on differentiation, strategic partnerships, and diversification suggests a positive outlook for the future.
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