Gateway Distriparks - Gateway to growth! - Nirmal Bang

Gateway Distriparks Ltd (GDL) is an integrated logistics player in the container movement space. It operates in three segments viz Container Freight Stations (CFS), Container Rail Operator (CTO) and Cold Chain Logistics. The company's core business in CFS continues to remain a cash cow with EBIDTA margins of ~54%. CFS segment saw pressure on volumes in FY12 due to low traction at the JNPT port, however realizations have remained firm. With added capacities coming up at the Kochi port and expansion at the JNPT port, we expect CFS volumes to grow by 2.8% in FY13E and by 2.4% in FY14E.

The investments in the Rail segment are getting paid off for GDL with its revenues growing by 40% in FY12 and its EBIDTA/TEU growing by a CAGR of 21% between FY10-12. The company is planning to add 5-6 rakes in FY13E and also start new shorter routes which would see rise in volumes while we expect marginal growth in margins in FY13E. Lastly, GDL is increasing its capacity in the cold chain segment by almost 2.5x of which we believe mostly would reflect in the FY13E revenues.

GDL has become a Logistics conglomerate by positioning itself as one of the largest CFS player and as the largest private Container Train Operator in India. Their investment in the fast growing cold chain segment is also gaining momentum. GDL's core business is high cash generating business with low consolidated debt of ~ Rs.104 crore as in FY12. ROE has improved from 14.3% in FY11 to 18.4% in FY12.

At CMP, the stock is trading at an EV/EBIDTA and P/E of 4.8 and 10.2x its FY13E earnings respectively and looks attractive. We recommend a BUY on the stock with a price target of Rs.178 which is 28% upside from current levels.

Source : Equity Bulls

Keywords