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Gateway Distriparks - Rail continues to drive earnings - ICICI Securities

Posted On: 2021-10-24 15:37:09 (Time Zone: IST)


Gateway Distriparks (GDL) looks forward to significant operational advantages (higher volume share + higher containerization + higher double stacking) as DFC phase 1 starts commercial operations (with diesel locomotive). Management also underlined the target to reach Rs10,000/teu of EBITDA in the rail business - prioritising value over volumes. GDL's rail performance in Q2FY22 was industry leading, with 46/8% YoY/QoQ volume growth, with significant market share gains in the NCR market on the back of prudent pricing. Capex to create satellite terminals for further market penetration in the NCR market continues, yet the cashflow profile appears strong enough to allow deleveraging. We upgrade GDL to BUY from ADD.

  • Rail volumes start to show benefits from DFC commissioning. Trial runs on DFC from Rewari to Palanpur are completed and the phase is fully commissioned. The significant shift from road to rail will happen after consistent operations begin on the Rewari to Palanpur line of DFC. Management expects to see regular operation on DCF from this quarter on this particular route. Electrification of Surendranagar to Pipavav has completed, so electric trains (with double stacked containers) can run from Garhi Harsaru to Pipavav. While this has also allowed start of a scheduled train service by Pipavav Rail, management doesn't see much competitive threat from the same.
  • Current capacity of leased rakes can allow 15% more volumes. Management believes there will be huge opportunity, as road cargos get converted into railway containers and existing tracks (Port to DFC) are upgraded to handle the 25te of axle load being carried at 100km per hour. Additionally, improving container penetration will aid business growth as per management (as only 55-60% container cargo actually being carried in containers and the rest of the part container load even today comes from breakbulk vessels). Gateway is confident of achieving double-digit growth irrespective of India's macro-economic growth because of better logistic infrastructure, which will convert break bulk cargo to containerized cargo.
  • Strong market share growth witnessed in the NCR. Gateway has taken a price increase in Ludhiana market as well as in NCR market; it is a marginal price hike which takes care of operational cost on account of inflation. NCR market share growth for GDL is due to the organic growth in the Gurgaon market where GDL has been dominant. GDL has been able to acquire additional volumes of existing customers as well as new customers. GDL has the best delivery time as of now, in terms of import and export directions from the NCR market (as per management).
  • Expansions in Snowman to target the pharma business, capex of Rs4.5bn. Company has internally created pharma vertical, where they do marketing of business separately from regular marketing. Management is looking to create an asset light model for cold chain transportation as a key business lever to turn profitable in the cold chain transportation segment. Management expects better pricing power from the new commissioned capacity in Coldchain warehousing in Cochin and Coimbatore. Snowman wants to expand its current pallet capacity to 20000 in the next 2-3 years and add area under management for the ecommerce business.

Shares of Gateway Distriparks Limited was last trading in BSE at Rs. 262.05 as compared to the previous close of Rs. 264.80. The total number of shares traded during the day was 619054 in over 927 trades.

The stock hit an intraday high of Rs. 276.90 and intraday low of 259.00. The net turnover during the day was Rs. 166190506.00.


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