Gateway Distriparks - Cold Chain's rising Prominence Moderates Profit Decline; Maintain "BUY" - Karvy

Gateway Distriparks' (GDPL) 1QFY14 consolidated EBITDA & PAT declined 6% & 15% YoY respectively to Rs.649mn & Rs300mn.

Lower volumes across both CFS & Rail segments hit profitability: Volumes handled at the CFS declined 9% YoY and 6% QoQ impacted by decline in container volumes at the major ports of JNPT & Chennai. Additionally, EXIM trade continues to remain sluggish which further impacted both CFS & Rail volumes downwards. Rail volumes declined ~15% YoY & QoQ.

Cold chain on fast track moderates profit decline: The cold chain's (Snowman Logistics) profitability continues to surge on account of its strong demand pull (higher pallet utilization of ~89%). With almost 45% of total capex during the last 6 quarters directed in Snowman, total pallets rose to ~53 K in 1QFY14. This drove its 58% YoY revenue growth. Higher volumes along-with operational efficiency & tax benefits led to 183% YoY surge in cold chain PAT. We expect the growth to continue as Snowman is expanding capacity to 80K pallets over next four quarters. Post the recent PE infusion of Rs600mn, Snowman is planning for an IPO to fund its on-going capex.

Stable CFS profit QoQ also cushioned the YoY decline: The total EBITDA declined 6% YoY (better than our estimates of 10% YoY decline). This was also driven by QoQ stable profit in the CFS segment vs. its continuous QoQ decline over the last 4-5 quarters.

Faridabad ICD's rail operations should boost the rail profitability: GDPL guided for getting the rail operations' approval from the Indian Railways in 2QFY14. This should boost its volumes handled by rail from 2HFY14 onwards. Additionally, the ramp-up in double stacking & hub/spoke model operations should drive segmental revenue & margin expansions.

Maintain positive outlook: The strong traction in GDPL's rail and cold chain businesses should offset the decline in CFS profitability in FY14E. We factor in EBITDA & PAT CAGR of 17% & 7% respectively during FY13-15E. We retain our "BUY" recommendation on the stock with a target price of Rs153 (earlier Rs160) per share valuing GDPL at ~11.5x its FY15E consolidated EPS.

Source : Equity Bulls

Keywords