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Maintain BUY on Gateway Distriparks - Upbeat outlook with expected commencement of DFC - HDFC Securities

Posted On: 2021-08-01 06:11:03 (Time Zone: UTC)

Mr. Aditya Makharia, Institutional Research Analyst, HDFC Securities

Gateway Distriparks (GDL) sustained the growth momentum with monthly railway volumes at ~25,000 TEUs (at similar levels of Q4FY21) as EXIM activities were relatively less impacted by the second wave of COVID. The management expects double-digit growth to sustain as Dedicated Freight Corridor (DFC) services between Rewari and Palanpur (which will connect NCR with Mundra, Pipavav ports) will commence this quarter. The improved TATs and double stack options will result in a shift from road to rail. Our EBITDA estimates are majorly unchanged. Maintain BUY with an SOTP-based TP of INR 360 (rail business valued at 14x Jun-23E EV/EBITDA).

Q1FY22 financials: GDL's revenue at INR 3.29bn declined 6% QoQ (+30% YoY). Volumes at 75,779 TEUs were largely in line with Q4FY21 (-2.6% QoQ). CFS volumes were up 3%. EBITDA margin, at 27.1% (-60/-15bps YoY/QoQ), was above the estimate as the company benefitted from improved volumes and rebate on container volumes offered by IR. Interest cost is down 30% YoY as the company has lowered its debt post the fundraise. APAT declined 5% QoQ to INR 436mn, aided by nil tax payout on availing of MAT credit.

Call takeaways: (1) DFC: The management expects Phase-1 between Rewari-Palanpur to be operational in Sep-Oct'21 as trial runs are already underway. Due to limited access to grid connectivity, diesel loco services will commence first, while electric trains will begin later. (2) CFS business: The management highlighted that the CFS segment EBITDA was ~INR 2,550/TEU vs its guidance of INR 2,800-3,000. This was affected by higher fuel prices, discounting and increase in labour cost. Margins are expected to normalise over the next year. (3) Snowman Logistics: It is now reclassified as an associate (earlier, asset held for sale) as Gateway is now well capitalised, post the rights issue. It will focus on its core warehousing business, along with pharma (to account for 15% of revenues) and e-com segments. (4) Merger update: After receiving SEBI's approval for reverse merger of GDL into Gateway Rail, the company has now received approvals from NCLT as well. It will shortly seek approvals from its shareholders to proceed with the merger formalities.

Shares of GATEWAY DISTRIPARKS LTD. was last trading in BSE at Rs. 281 as compared to the previous close of Rs. 282.05. The total number of shares traded during the day was 8848 in over 163 trades.

The stock hit an intraday high of Rs. 293.9 and intraday low of 280. The net turnover during the day was Rs. 2522950.

Source: Equity Bulls

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