Gateway Distriparks rating – Buy: Results came as a positive surprise

While Pipavav port is predicted to be linked by Sep’21, Mundra is predicted to be linked later in FY22, as per the mgmt.

Gateway Distriparks (GDL: CFS + Rail) shocked positively in Q3FY21 led by sustained enchancment in commerce and improved profitability (rail business). Mgmt anticipates sturdy revival in business volumes as it witnessed peak output in Rail and close to peak quantity in CFS section. GDL is without doubt one of the first operators to run trains on the newly inaugurated part (from Garhi ICD on Rewari-Madar). While Pipavav port is predicted to be linked by Sep’21, Mundra is predicted to be linked later in FY22, as per the mgmt.

GDL’s deleveraging course of stays intact whereas the restructuring course of to enhance fungibility of money flows and operational synergies is predicted to be full over the subsequent 8-10 months. We preserve Buy with a Mar’22 TP of Rs 220.

Q3FY21 Summary (Rail + CFS): Consolidated income grew 5% y-o-y (+20% q-o-q) as blended realisations grew 6% q-o-q whereas volumes fell solely 3% y-o-y. PAT tripled y-o-y to Rs 347 mn (Rail PAT at Rs 361 mn, +143% y-o-y/+109% q-o-q). (i) Rail: Volume grew 9% y-o-y (vs. 5%/11% y-o-y development in Concor/IR EXIM volumes; partly resulting from spill over from Q2) with recovery in commerce whereas realisations improved 8% q-o-q (flat y-o-y). Ebitda/TEU improved 25% y-o-y/18% q-o-q to highest ever Rs 9,009/TEU. (ii) CFS: Volumes fell 11% y-o-y however improved 7% q-o-q with recovery in commerce although realisations normalised vs. Q2FY21 ranges (-7% q-o-q/+9% y-o-y) when realisations had been increased resulting from excessive dwell time. Ebitda/TEU at Rs 2,880/TEU fell 15% q-o-q however elevated 37% y-o-y on account of upper dwell time.

Set to learn from demand revival and DFC: Given the context of improved home and international situation, it believes business quantity development has bottomed out and has seen sturdy indication from the strains. DFC is predicted to have a number of impression on CTOs like GDL such as a) operational effectivity (double stacking of all containers); b) higher visibility on timelines (and therefore buyer shift); and c) vital working leverage, although half is predicted to be shared with prospects.

Raise estimates/TP: We elevate our FY21E-FY23e EPS by 99%/65%/28%, respectively (partly on account of low base) to replicate Q3FY21 efficiency (increased rail and CFS margins) and mgmt outlook on improved margin steerage (Rs 8,000/TEU) for rail. We proceed to worth GDL’s rail business (9x Mar’23 Ebitda) and CFS (5x) individually. We preserve Buy on account of cheap valuations. Key dangers: a) decrease-than-anticipated cargo development and b) adversarial consequence on litigation.

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