Why is Allcargo Logist. falling/rising?

Recent Price Movement and Market Performance

The stock has been under pressure for several weeks, registering a steep one-month loss of 64.11%, significantly underperforming the Sensex, which gained 1.13% over the same period. Year-to-date, Allcargo Logistics has declined by 75.78%, while the benchmark index advanced by 8.55%. This stark contrast highlights the stock’s persistent weakness relative to the broader market.

On the day in question, the stock underperformed its sector by 2.76%, continuing a two-day losing streak that has resulted in a cumulative fall of 4.18%. Technical indicators further underscore the bearish sentiment, with the share price trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages. Such positioning typically signals sustained downward momentum and a lack of near-term buying interest.

Despite the decline, investor participation has increased, as evidenced by a 60.94% rise in delivery volume on 10 Dec compared to the five-day average. This heightened activity suggests that while selling pressure dominates, some investors may be repositioning or exiting holdings amid the stock’s slide.

Financial Performance and Valuation Concerns

Allcargo Logistics’ financial results have been a significant factor weighing on its stock price. The company reported a sharp decline in quarterly net sales to ₹537 crore, down 76.1% compared to the average of the previous four quarters. This steep contraction in revenue has directly impacted profitability, with the nine-month period showing a net loss after tax of ₹15.59 crore, representing a 34.41% deterioration.

Cash reserves have also diminished, with cash and cash equivalents at a six-month low of ₹138 crore, raising concerns about liquidity and operational flexibility. Over the past year, profits have fallen by 59.5%, compounding investor worries about the company’s ability to generate sustainable earnings.

Long-term growth metrics paint a similarly bleak picture. Operating profit has contracted at an annualised rate of 39.45% over the last five years, indicating persistent challenges in expanding core business profitability. This weak growth trajectory is reflected in the stock’s valuation, which, although trading at a discount to peers with an enterprise value to capital employed ratio of 1.2, remains unattractive given the company’s low return on capital employed (ROCE) of 1.5%.

Consistent Underperformance Against Benchmarks

Allcargo Logistics has consistently underperformed major market indices and sector benchmarks. Over the last three years, the stock has declined by 85.24%, while the Sensex has appreciated by 36.40%. Similarly, the five-year performance shows a 55.56% loss for the stock against an 83.99% gain for the benchmark. This persistent underperformance has eroded investor confidence and contributed to the ongoing sell-off.

Despite a relatively strong debt servicing ability, with a low Debt to EBITDA ratio of 1.50 times, the company’s deteriorating operational metrics and negative earnings growth have overshadowed this strength. Promoter holdings remain significant, but this has not translated into positive market sentiment or price support.

Conclusion: Why the Stock is Falling

The decline in Allcargo Logistics’ share price on 11-Dec is a reflection of deep-rooted challenges facing the company. Weak quarterly sales, sustained losses, shrinking cash reserves, and poor long-term growth have all contributed to a loss of investor confidence. The stock’s persistent underperformance relative to the Sensex and sector peers further exacerbates negative sentiment.

Trading below all major moving averages and experiencing increased selling volumes, the stock remains under pressure. While its valuation metrics suggest some discount relative to peers, the fundamental weaknesses in profitability and growth prospects continue to weigh heavily on the share price. Investors are likely to remain cautious until there is clear evidence of operational turnaround or improved financial performance.

Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →