Accuracy Shipping Ltd
NSE:ACCURACY
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Accuracy Shipping Ltd
Earnings Call Analysis
Summary
Q4-2024
In Q2 FY '24, Accuracy Shipping reported a revenue of INR 2007 crore, down from INR 2038 crore, due to weak demand. Gross profit fell to INR 11 crore with a 5.3% margin. Notably, the heavy commercial vehicle segment thrived, contributing 31% to revenue. The company targets INR 700 crore in revenue for FY24 with EBITDA margins projected between 2.5% and 3%. Despite industry pressures from geopolitical tensions impacting freight rates, Accuracy remains optimistic, highlighting a 7% to 9% growth in exports. The firm leverages diversified services across various sectors to enhance profitability and customer base expansion.
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Ladies and gentlemen, good day, and welcome to Q2 and H1 FY '24 Earnings Conference Call of Accuracy Shipping Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance of the company and may involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Vinay Tupati, Managing Director of Accuracy Shipping Limited. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen, and a very warm welcome to everyone to our Q2 and H1 FY '24 earnings conference call. We have uploaded our updated investor presentation on the stock exchange and company's website, and I hope everyone had an opportunity to go through the same. Along with me on the call, I have Mr. Ashish Lalwani, our CFO; and SGA, our Investor Relations Advisor.
I will talk about the economy first. The global economy continues to remain weak despite marginal recovery in the first half with high interest rate, sluggish global demand and geographical tensions. India on the other hand continues to remain resistant and stand as one of the fastest growing economies in the world and is likely to be the third largest economy in the world by 2027. The IMF anticipates a growth of 6.3% in India's GDP for the financial year 2023-24, reflecting at 20 basis points increase from the July forecast. Our ongoing [indiscernible] guidance is anchored in the promising trajectory of India's economic growth.
Shifting our focus to the industry, the global shipping sector has been contending with an extended period of diminished freight demand throughout the current year. The first half of the year showed no sign of improvement in ocean freight rates coupled with the subdued cargo volumes. Customer inventory levels persisted at elevated levels due to a subdued consumer demand. A swift rebound in rate is not anticipated at this time.
Now, let me provide you with an overview of Accuracy Shipping Limited incorporated in 2008. Our company has involved into end-to-end logistics solutions provider. The company has had a wide reach with 14 branch offices and 64 agency agreement across the globe. We are present across the volumes chain from collections of goods from the sellers warehouse to delivery of goods to the buyers warehouse. Accuracy is a trusted partner for both bundled as well as standalone services. Our expertise spans across clearing forwarding, warehousing, transportation and more, all under one roof to provide best services to our clients.
Accuracy started as a custom clearance provider, and we have been able to diversify and create new revenue stream for the business and we have adopted 3 progressive strategy. In industry diversifications over the years, we have been able to reduce our reliance -- realizations on marble, granite and ceramic tiles. We are focusing on other industries such as tyre, paper, textile, glass and other sectors. We are committed to increase our services of business from the other industry. Under revenue diversifications, we extended our service lines and created more avenues for revenue generations.
The multiple services offered under Accuracy Shipping for clearing and forwarding, last mile delivery, warehousing, sale of petrol and petroleum products, sale of heavy commercial vehicles and its spare parts, we are confident of increasing our revenue with the help of our diversified portfolio.
Our third strategy of growth is the focus on increasing our share of business from extending customers and onboarding new customers across service.
Let me now speak on the factors driving the segmental performance for the half year ended September 2023. Our first segment of logistics in the current trade scenario has unfortunately eroded our negotiating power with the shipping lines, with last mile operations further impacted by high operating cost. Despite these challenges, we at Accuracy maintain optimism regarding the success of this segment. Our confidence stems on the wealth of experience and expertise that has allowed us to carve out a reputable brand for Accuracy in the industry.
The second segment involve the sale of heavy commercial vehicles and their spare parts. This segment continued to exhibit strong performance contributing to an enhanced profitability profile. A key [rationale] behind this segment was the cost synergy and saving achieved by providing services to our own fleet 373 trucks, strategy that is proving to be highly advantageous. Additionally, the high margins arise from the sale of spare parts further bolsters the segment’'s overall success. For H1 FY '24 the segment contribute nearly 31% to the overall revenue. Our strategic approach to the revenue diversification has proven instrumental, particularly during the challenging times when our core business faced pressure.
Lastly, our segment involving the sales of petrol and petroleum products through fueling stations operate strategically along 2 points of the national highway with 5 refueling points. We ensure swift services and our comprehensive range of everything, facility, effective crossselling. These positions allow us to serve our increased number of vehicles and our commitment to provide a complete range of products, reinforce our competitiveness in this segment. Our diversification strategy is beginning to yield positive results as we persistently work towards cost control and overall stability.
Initiatives to increase wallet share from existing customers have been successful complemented by the establishment of the dedicated salesforce. This team is actively engaged in bringing new customers within our existing geography, while expanding into new territories, trade lines and routes broadening the scope of our services offering.
Let me now take you through the financial and operational highlights for Q2 and half quarters 2024. Our consolidated revenue from operations stood at INR 2007 crore as compared to INR 2038 crore.
The revenue was impacted due to weak demand environment. Gross profit for quarter 2, 2024 stood at INR 11 crores as compared to INR 18.1 crores in quarter 2 of FY '23. The gross margin for the quarter stood as 5.3%. EBITDA for the quarter ended September 2023 stood at INR 2.4 crores as compared to INR 4.4 crores.
Turning our attention to the half yearly performance. The consolidated revenue from operations amounted to INR [indiscernible] crores, a decline from INR 487 crores. This decrease is attributed to the subdued global demand, which significantly impacted our performance in the first half of the financial year. The gross profit for half year 2024 stood at INR 20 crores as compared to INR 32.8 crores in FY '23. EBITDA for the half year ended September 2023 stood at INR 5.3 crore as compared to INR 14.9 crores. Service wise, revenue for the half year ended September 2023 from clearing and forwarding stood at 49% and transport last mile stood at 15% sale and increased to 31%. Sale of petroleum and petroleum products stood at 4% and others stood at 1%. On the industry front, marble and granite formed 41% of revenue for half year 2024 as compared to 36% in half year '23. Detailed breakout has been given in our investor deck.
With this, I would like to open the floor for question and answers to our friends and investors and all. Thank you.
We now begin the question and answer session. [Operator Instructions] The first question is from the line of Amit Shah from Ace Securities.
Sir, how many of our customers are taking integrated service of transportation and clearing and forwarding, and how many are just using clearing and forwarding services?
70% to 75% of our customers are taking end-to-end services from our side. 15% to 20% customers only taking clearing and transport, and rest only taking forwarding part.
Okay. And what will be your revenue contribution from top-10 customers and what has been in the past?
More or less 5% is the revenue for the top-10 customers.
Okay. And in the past?
In the past, more or less 5% to 10%.
[Operator Instructions] Next question is from the line of Karan Mehra from Mehta Investments.
Sir, a couple of questions from my end. We recently signed a contract with a leading tyre manufacturer. So if you can help us like how has the ramp up of this account been and what is the wallet share from that customer? Also like are we seeing a contribution -- like how has been the contribution to our top line been from this?
Sir, we have signed with tyre companies agreement like Apollo and Fiat. And almost that will help us be about 3% to 5% in our total turnover.
Okay. And if you can share your views on the HCV dealership business, like what are its margins and ROCs that we are looking at and how do we look to -- like do we look to divest that business or there is still some synergies to be continued in Accuracy itself?
Already I have mentioned in my speech, I am a clearing, forwarding and transporter and also purely [indiscernible] fuel provider company and in involve door-to-door logistic business. So many of the transporters is our vendor also and company involved in transportation business in the last 18 years and company [indiscernible]. My career is totally in this industry near about 23, 25 years from a job of an entrepreneur and till Chairman. I got this opportunity from Ashok Leyland to sell this vehicles, I have dealerships in Kutch district. Because of this, because I know almost all the market buyers and service people, so we started this new business as an MHCV under Accuracy. And this will help us with almost INR 200 crores by end of the year.
Understood. And sir, one last question. If you can help with what is the current debt level on our books and any plans of repayment?
The debt level is near about INR 40 crores. Total is INR 98 crores including our vehicle loans and term loans and CC loans.
And what is our plan of repayment?
Gradually, we are paying every month on an installment basis and our loan will be complete by 2027 March with nearly 80%, 85% loan debt.
[Operator Instructions] Next question is from line of Rajvi Shah from Bright Securities.
I guess I have a few questions. The first is, do we see pressure on the global face on account of the ongoing war that took place across the globe?
Yes. Of course, this is a global -- we all as a logistics company are facing a global pressure. First, Russia and Ukraine happened and all Europe suffered because of this Russia and Ukraine war. Now the Middle East, Israel and the Palestine war. And because of this, all the Middle East and upper gulf sector is now in panic positions. But as far as it is concerned, we are the logistics provider and we all know without logistics nothing can happen in the world. So yes, little bit of time pressure, but of course logistics will not stop, it will bounce back.
Next question is, sir, what would be the overall revenue and margin guidance for FY24 and FY25?
Top line more or less INR 700 crores and EBITDA is more or less 2.5% to 3%.
Okay. I just had one last question. If you, sir, shed some light on what differentiates us from other competitors? And also, do we have any like-to-like peers?
Your voice is getting very disturbed. You are, I think, in traffic.
Sorry for the disturbance. My question is if you could shed some light on what differentiates us from our competitors and do we have any like-to-like peers?
Yes,yes. We at Accuracy Shipping Limited have all facility, like own custom clearance license which is normally known by everyone and we have owned our freight forwarding license, we have our own trucking, we have our own warehousing, and we have our own bonded warehouse. So this all 4 combo which is called end-to-end logistics service provider. And the same way -- same time, I have 69 countries strategic partnerships and that partnerships are long-lasting partnerships, more than 10 to 12 years with many of the countries.
So they are also -- my strategic partner also, like us, they are very strong in a particular country. Now the peer-to-peer in India as far as concerns under one roof, one combo, I don't think anybody has this kind of facility or skill to provide end-to-end logistics services. People are writing end-to-end, door-to-door, but someone have only C&F license, then freight forwarding license, don't have trucking, don't have bonded warehouse, don't have warehousing facility, but someone have trucking only C&F.
But as far as concerns door-to-door if you want any kind of commodity I can pick up, I can store, then again, I can load on the containers, load on the [indiscernible] and in the same container, I can deliver at U.S.A. at a particular position, a particular warehouse, a particular house, particular showrooms, like that. So this kind of facility in India I don't think anyone has.
[Operator Instructions] next question is from the line of Jigar Shah from AK Securities.
Sir, I have a couple of questions. As we can see that there has been a volume growth in terms of containers handled, but there has been a sharp decrease in the realization. So does this impact our profitability in a big way or majority of the costs are passthrough and we can maintain similar margins?
It is correct because of the freight reduced because I have freight forwarders, my main product is freight booking with the shipping lines, because I'm handling the bulk containers, so I'm booking almost vessel-to-vessel very heavy containers and the freight is reduced like anything. I will give you an example for you to understand better our industry. From India to US freight one year back and before COVID, average freight from India to US almost was $5,000, $6,000 average, and today average freight is $1,800 to $2,500 or $3,000 sometime for some vessels.
From India to Gulf like Jebel Ali from Nhava Sheva, from Mundra, from Chennai, average freight in COVID was near about $1,200 for 20-foot and 40-foot $1,700 to $1,900 and before COVID it was $500 to $620 or $800, 40-foot, and today it is minus $50 in Gulf countries, Gulf means Jebel Ali specific in cases, just as an example.
Because of that, our of course booking margin, if I have a cushion of $7,000 freight, I have a power to negotiate with the shipping line and get the profit because I have cargo, I have shipper, I have supplier, I have buyer. But now the shipping line freight decreased by a number -- 1,000% down and that's the reason it's impacting our margin. But it is -- yes, it is the time being because of the globally economic tension. But once it will be little bit slow and settled, it will be again boom up and we will grow up in the same way.
Got it. That was helpful. Sir, secondly, what can we expect our steady state margins for our C&F business?
Can you repeat the question please?
What can we expect steady state margins for our C&F business?
Yes. In custom clearance and forwarding, we're about 5% to 7%.
5% to 7%. Okay. Got it. And lastly, what is the outlook on freight rates and how has this trend been prevailing in the last few months?
I have a cargo, I have totally [indiscernible] my company has a strong position with the customer base, volume base. Once the freight bounce back, our top line and the bottom line, everything will be improved. You see, in the custom clearance there is no decrease in the margin. In trucking, even stable, but the freight decreased by 1,000%. And the freight is our main component in our industry where we are not playing we can say, but we are earning a good margin because if the freight is $32,000, I canPush the shipping lines, I have 5,000 containers need this freight.
Now, I have a container but shipping line don't have freight to negotiate $500 -- $100 or $700. So this is the reason it is impacting now, but we at Accuracy because I have seen the industry in the last 23 years before corona in 2006-07 drastically you can say mainly recession, and '17-'18 recession also I have seen before corona, before COVID. So we are waiting. The shipping industry in 5 years going very, very fastly on top and after 5 years it will be going down, then it will reflect on medium level and then again it will pick up.
So, I'm hoping that till March if this Middle East, Israel and Palestine war will be settled or something will not happen bigger now than this, then freight will be revised, because Russia-Ukraine war almost now in a cool mode. So people are now take it as a liberal or normal way, it will continued, like we are facing a problem with India, Pakistan, the same way the Russia and Ukraine, now people will take it lightly. So, all the economy started people have started buying, selling, doing their normal business. So I hope till March the situation will be little bit changed.
This Israel and Palestine war is more dangerous than the Russia and Ukraine war, and the cool and calm not happen more than this, then the situation will be something better than this now.
[Operator Instructions] Next question is from the line of Vikram Suryavanshi from PhillipCapital.
I joined the call a bit late. So how is the import and export mix for us, and particularly from export side, are we seeing any opportunities?
Sir, of course. Export is little growing by 7% to 9% every month. As far as it is concerned, you are the very best known person in the industry -- of our logistics industry because you have almost all data of import, export minus/plus growth ratio. I think the last month you have sent the report which I was going through and it was really fantastic report for Nhava Sheva up and down decrease data. That helped me to make the same way data for Mundra and Chennai also. So, I have seen Mundra and [indiscernible] almost growing by 7% to 9% in the export growth.
And do we see that Hazira port is also an opportunity for us or we will more stick to Mundra port?
Yes, Hazira is growing, sir. Hazira is growing by 3% to 4%.
Okay. And in case of a textile kind of or basically non-marble or tiles segment, particularly textile or any other goods, are we seeing some kind of recovery or it's still...
As far as concerned, if you see the pharmaceutical industry, tyre industry, even paint industry is growing in a very good way, particularly in this scenario also. So as far as it is concerned, in India, some of the industry, I don't know any industry, which industry I'm belonging or I'm doing the business particularly and they are really in the good state; tyre, paint industry, these are all the 3 t,o 4 new industries, yarn, fabric, they are all growing.
Got it. Yes. I think rest of the things are quite good only. I think freight rate is a bigger concern for us...
Yes, yes, being a global freight forwarder, it is really very bad thing for us because we are hoping and we are praying to God the freight should improve and increased. In this case, there is no panic. But in this case our margin got reduced because if the market is improved or freight will increase, then our negotiation power will be strong and buying and selling will be strong because we have very good relation with the Maersk line, MSC, CMA, Hapag [indiscernible] carriers because of the volumes controlled since many years, so we have a very good agreement with them.
But the problem is that the freight level decreased by anything what we negotiate with them. Sometimes we also feel pain for them. I can give you one example. I have never seen in the last 23 years as an entrepreneur from Venice to Mundra, Venice in Italy port to Mundra, never, ever decreased from $700 freight to any single dollar. And today freight is $150. In the COVID, it's worth $7,000, $9000 and before COVID $700, $800 every month, and the last 10 to 12 months, the freight is $150, sometimes $120 even -- reach $120 mark. In $120, what we will negotiate with them? Supposing $700, I'm negotiating $550, $600, $620 and selling $680, $690 or something like that, 15% to 20% or 30% margin. But in $120, what do we keep in the margin? Because of this, our margin got reduced. But I hoping, till March it will bounce back because I have seen this recessions in 2004, 2005 and 2006 also. This would be the best time for industries to get settled.
Got it. The industry, sir, if we look at our bulk cargo rates, we are into containers only, but just as an industry phenomena when container rates are so low and bulk rates are quite relatively high, so is there any some type of cargo which can move to container because of rate or is that helping us or possibility?
Absolutely, your question is a fantastic question. This is the reason nowadays containers cargo is increased because freight rate is decreased by anything and still break bulk cost is high compared to the containers. So the people are now -- the break bulk exporters are now seating the sample by containers because in the container they can load 500 tons one way, 2,000 tons one way. In the break bulk, they can even if freight is high and then also they have to wish for the full vessel lot. And in the container, no need to weigh, 500 tons you can load, 1,000 tons you can load, like that way. So this is in -- the container business is booming a lot.
[Operator Instructions] Next question is from the line of Yug Mehta from AB Capital.
Sir, do we see increased volumes across industries and which are the industries which are seeing higher traction from India?
Basically [indiscernible] now the pharmaceutical has a very good volume for Africa, Middle East, of course, Europe also. Now, second, tyre industry is booming a lot, if you see the MRF Tyre result, Fiat, very good. Cement is doing export a lot to Colombo, Madagascar, Africa. So these are all the industries booming a lot.
Sir, can you also provide the margin split between our 3 main business verticals that is clearing and forwarding, transportation and petroleum?
Okay. Two minutes, I'll remove the figures. Clearing and forwarding, transportations, warehousing and other things 1.78% and fuel 0.70%, ASL motors 1.30% on EBITDA level.
Sir, lastly, can you provide margin split in clearing and forwarding and within that in transportation...
You mean sales figure, right? Actually, we are providing the bundle services door-to-door maximum 70%, 75%. So generally we were combo [indiscernible] do no understand our competitors or anyone -- I don't want to disclose the market how I am running the door-to-door as the number one position. So most probably, I'm giving a bundle services.
Next question is from the line of Ravi Shah from Opal Securities.
Am I audible?
Yes.
So basically, I had a question, I was going through our presentation. In that, it shows that we have roughly 370 trucks and our peers are all moving to an asset-light model. So what I'm trying to gain is -- what I'm trying to understand is what are we doing? So are we going to go there, are we still going to stay on the same model, what's our strategy here?
No. This 370 trucks, it is our own company trucks to provide the customer better service. I know now there's light model and many people are doing like that way. But being as a logistic company, door-to-door service provider, it is not possible to take 100% truck from outside to serve our client on their own satisfaction level. If I will not give a service because my main product, my business main product is service provider. If my truck will not reach on the morning 10:00 or 10:30, then the customer will not retain or remain with us.
Yes, every day, I'm taking all over India basis 50 to 100 trucks from outside. But in that my contribution is only 30% to 50% and 50% truck I'm taking from outside only. So these many vehicles I'm keeping either safer side to make our service level intact for my client.
Understood, sir. And one more question would be like a broader understanding on the overall industry, like where are we headed now? Even our company, where are we headed? Like keeping in mind the declining freight rates, etc., so how are we planning things out just like an understanding on that?
Yes, my people will answer will your question, sir.
Declining of freight rates is a temporary problem and it will be resolved by a year or two. So we are constantly sticking towards our shipping division only and not looking towards as a diversified industry or anything like that.
Understood, sir. And any particular sector we're looking at catering to more, I mean, for efficiency purposes?
For efficiency, we are continuously trying to diversify our industry. As of now, you can see that we have moved towards the tyres and yarn, textile, towards the pharma also a little bit, but we are trying to diversify as more and as well as possible. We are also looking towards the agri; we are exporting agri, wheat and wheat powder and rice. So we are trying to diversify as much as possible.
As there are no further questions, I will now hand the conference over to the management for closing comments.
Ladies and gentlemen, thank you very much for giving a time for our earning call and keep supporting and soon we will come back with new earning calls. Bye-bye. Thank you.
On behalf of Accuracy Shipping Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.