Gateway Distriparks Rating: Buy; Rail business did very well

By: |
November 23, 2019 12:23 AM

FY20/21e Ebitda tweaked to factor in adverse macro; medium term prospects are good; ‘Buy’ retained

Management maintained its intent to sell other non-core assets to reduce debt by ~Rs 3 bn by FY21 – this lends comfort.Management maintained its intent to sell other non-core assets to reduce debt by ~Rs 3 bn by FY21 – this lends comfort.

Q2 rail volume grew 7% y-o-y (+9% q-o-q; vs. 3% decline for Concor) as it gained market share in Ludhiana (at 40% vs. 36% y-o-y) though NCR volumes declined on weak auto volumes (market share largely stable at 12.5%). Ebitda margin up at Rs 7,125/teu (Rs 5,900 q-o-q; Rs 5,700 in FY19) on better business mix/operational efficiency. In sync with its earlier commentary to reduce debt (Rs 7.3 bn currently) through asset sale, GDPL sold Chandra CFS (Chennai) for Rs 470 mn. Management maintained its intent to sell other non-core assets to reduce debt by ~Rs 3 bn by FY21 – this lends comfort.

While we tweak our FY20/21e Ebitda to factor in adverse macro, GDPL’s strategic rail terminal location + additional rake capacity (on lease) will help it garner healthy market share on macro revival in medium term (aided by phase I DFC commissioning, connecting to Gujarat ports in FY21-22e).

Key highlights
GDPL’s Q2 performance is not comparable on consolidation of Gateway Rail Freight (GRFL):

Consolidated performance (Rail+ CFS): Revenue stood at Rs 3.2 bn and Ebitda at Rs 0.7 bn (adj Ebitda margin of 26.1%; IND AS impact of ~Rs 116 mn). Reported PAT at Rs 174 mn.
Growth plan intact, but current focus on paring debt: GDPL plans to add ~3 rail terminals, which would feed into its hub terminals at Garhi Harsaru and Viramgam, optimising asset utilisation in the medium term. However, this planned capex of Rs 1 bn over
FY20-21 (to be funded from internal accruals as per our workings) may be back-ended given the company’s current priority to reduce leverage (2-year moratorium on NCDs issued).
Snowman Logistics: Q2 revenue was flattish (16% growth in transportation, negated by 6% dip in warehousing), pallet utilisation stood at 77% (vs. 90% y-o-y) on low sea food (largest category) volumes. Ebitda margin improved to 26% (25% y-o-y) as company focused on yield; net loss of Rs 14 mn (Rs 12 mn profit y-o-y). Management to focus on quick service/FMCG categories on higher yield.

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